Inflation report shows rise days before Trump takes office

Consumer prices rose 2.9% in December from a year ago, ticking up from the previous month and extending a resurgence in inflation just days before President-elect Donald Trump takes office. The reading corresponded to economists’ expectations.

The fresh data arrives after a jobs report last week showed stronger-than-expected hiring in December, sending the stock market tumbling and bond yields soaring on fears the Federal Reserve may delay prolonged rate cuts.

The Fed may find further reason to delay those rate cuts in Wednesday’s report, as stubborn price increases could raise concerns that inflation would move even higher if rates were to be cut.

The December inflation reading marks an increase from year-on-year inflation of 2.7% in the previous month.

Core inflation – a closely watched measure that strips out volatile food and energy prices – rose 3.2% in the year ended December, ticking lower than the previous month, the data showed.

Food prices rose 2.5% in December from a year ago, moving higher than the previous month, but marking slower price increases than overall inflation.

Prices rose for a range of items last month, including shelter, airfare, used cars and trucks, new vehicles, motor vehicle insurance and medical care, the US Bureau of Labor Statistics said. By contrast, prices fell for personal care products and alcoholic beverages, as well as a wide range of foods, such as white bread, seafood and ice cream.

Egg prices continued to soar in December due to a bird flu that has decimated supply in recent months. The price of eggs rose 36% compared to the previous year, data showed.

Inflation has fallen dramatically from a peak of more than 9% in June 2022, but price increases remain above the Fed’s target rate of 2%.

The Fed pulled back in its fight against inflation in the final months of last year, cutting interest rates by one percentage point. Still, the Fed’s interest rate remains at a historically high level of between 4.25% and 4.5%.

The Fed has already indicated concern about the resurgence of escalating inflation in the latter part of 2024.

Last month, the Fed forecast fewer rate cuts in 2025 than they had previously indicated, suggesting concerns that inflation may prove more difficult to control than policymakers thought just a few months ago.

At a news conference in Washington, DC in December, Fed Chairman Jerome Powell said the central bank may proceed at a slower pace with future rate cuts, in part because it has now cut rates by a significant amount.

Powell also said a recent resurgence in inflation was affecting the Fed’s expectations, noting that some policymakers considered uncertainty associated with potential policy changes under Trump.

“It’s common sense to think that when the road is uncertain, you slow down a little bit,” Powell said. “It’s not unlike driving on a foggy night or walking around a dark room full of furniture.”

Trump has proposed tariffs of between 60% and 100% on Chinese goods and a tax of between 10% and 20% on every product imported from all US trading partners.

Economists widely predict that tariffs of this magnitude will increase the prices American shoppers pay, as importers typically pass on a share of the cost of these higher taxes to consumers.