Consumer price growth rose in December, a sign that Trump will inherit stubborn inflation when he takes office

Consumer price growth ticked up in December, a sign that President-elect Donald Trump will inherit the inflation problems that dogged the Biden administration when he retakes the White House next week.

The Bureau of Labor Statistics reported Wednesday that the annual inflation rate — which is calculated based on prices compared to a year ago — rose to 2.9% from 2.7% in November.

On a monthly basis, the rate rose to 0.4%, up from 0.3% a month earlier and above expectations.

Even as the broader inflation index picked up, a measure that strips out volatile food and gas goods rose less than expected. The so-called “core” reading is closely watched by investors.

Stock futures soared after the report’s release, with the Dow Jones Industrial Average tipped to open higher by nearly 700 points and the S&P 500 and Nasdaq set to jump more than 1.5%.

Traders were also encouraged by the “shelter” category, which saw its smallest 12-month increase since January 2022. This component, which measures several changes in rent growth, had not declined meaningfully in many months.

Some market analysts said the surprise core reading in Wednesday’s report signals choppy conditions as Trump takes office.

“Markets are likely to get whipped over the next few data releases as investors look for a narrative they can be comfortable with for more than just a few days at a time,” Seema Shah, chief strategist at Principal Asset Management, said in a note . .

On Friday, the BLS reported that the country added 256,000 jobs last month, which significantly exceeded expectations and indicates that US economic growth not only remains steady but may also be warming.

Trump was re-elected in part to maintain the economic momentum that took root during the Biden administration. The proof can be found in figures for the gross domestic product consistently exceeded expectations and stock prices that have risen to all-time highs.

But that growth came at the expense of years of rising inflation, not to mention higher borrowing costs for the US and higher interest rates for consumers.

If these conditions persist, they could elevate Trump’s economic policy agenda, which many mainstream economists say could result in further price increases.

“Markets initially celebrated the election result, but the party was less celebratory than it was in 2016-17,” BCA Research said in a note to clients on Monday. “The macro backdrop is not as forgiving of deportations, reflation and tariffs as it was eight years ago, and the incoming administration may face a tougher ride than it did in its first round.”

Markets have responded to the threat of further price increases by punishing equity and bond investors. The initial surge in stock prices that accompanied Trump’s election in November has been almost completely erased.

Meanwhile, US borrowing costs, already under pressure from skyrocketing debt issuance, have hit new highs alongside signals from the Federal Reserve that it intends to keep its key interest rate elevated in response to the threat of further price rises.

Trump’s tariff threats have particularly heightened those fears – with some analysts suggesting that some consumers may have already sent prices up as they pulled out purchases in anticipation of the trade tariffs.

“Recent economic strength has combined with a rising threat of tariffs to increase upside inflation risks,” Shah, of Principal Asset Management, said in a separate note ahead of Wednesday’s release.

Not all sectors of the economy are showing strength. White-collar sectors, reflected in the business and professional service components of labor surveys, have added almost no new net jobs over the past 18 months. Wage growth in manufacturing has also stalled.

And not all economists express strong concerns about renewed price increases as a result of Trump’s planned policies — or that those plans would result in the Fed unexpectedly raising interest rates.

“We don’t expect changes in fiscal or immigration policy to boost inflation appreciably, and we’re hard-pressed to imagine tariffs raising inflation enough to make a plausible case for rate hikes that don’t also unsettle the stock market, which itself is very less tariffs did in 2019,” Goldman Sachs chief economist Jan Hatzius wrote in a recent note.

But the overall mood remains cautious as hopes for more “disinflation” — or a slower rate of price increases, the condition Trump most wants — hang in the balance.

“Disinflation from here on out will be much more gradual,” Bank of America analysts said in a note to clients this week.