The Seemingly Stuck Core Inflation Rate Just Budged

US inflation picked up last month as prices rose for gas, eggs, and used cars, yet the AP reports underlying price pressures also showed signs of easing a bit. Wednesday's report from the Labor Department showed that the consumer price index rose 2.9% in December from a year ago, the highest since July and the "fastest one-month increase in overall prices since February," per the New York Times. It was the third straight increase after inflation fell to a 3.5-year low of 2.4% in September. Yet excluding the volatile food and energy categories, so-called core inflation declined to 3.2%, after remaining stuck at 3.3% for three months in a row. A decrease had not been expected, and CNBC reports Dow futures jumped 695 points on the news (sky-high quarterly earnings reports from US banks played into this, too). More:

• Core inflation move is reassuring: The slowdown in core price increases comes as a relief as many economists and investors have worried that inflation has gotten stuck above the Fed's 2% target, after a steady decline in prices in 2023 and for much of last year. Such concerns have sent interest rates on Treasury securities higher, which has also pushed up borrowing costs for mortgages, cars, and credit cards, even as the Fed has cut its key rate.
• Workers get less reassuring news: CNBC reports inflation-adjusted earnings fell by 0.1% in December, making for a year-over-year gain of just 1%.
• The Fed's view: Last week, minutes from the Fed's December meeting showed that economists at the central bank expect inflation to remain about the same this year as in 2024, pushed up a bit by higher tariffs. Fed Chair Jerome Powell has said the central bank will keep its key interest rate elevated until inflation is back to 2%. As a result, Wall Street investors expect the Fed to cut its key rate just a single time this year, from its current level of 4.3%.

(More inflation stories.)