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US prices rose 3.4% last month

By HENG WEILI in New York | chinadaily.com.cn | Updated: 2024-01-12 11:25

People walk with umbrellas during rainy weather in Manhattan, New York City, US, Jan 7, 2024. [Photo/Agencies]

Inflation reared its stubborn head in December, coming in slightly higher than expected and potentially altering the Federal Reserve's timetable to begin easing interest rates this year.

Inflation was up 3.4 percent compared with the year-ago rate as measured by the Consumer Price Index (CPI) compiled by the US Labor Department's Bureau of Labor Statistics (BLS), which released the report Thursday.

The consensus by financial data company FactSet was for a 3.2 percent rise.

"The final stretch of the path back to the 2 percent inflation target could be harder than the market is anticipating," Ryan Brandham, head of global capital markets, North America, at Validus Risk Management, told Reuters.

He was referring to the Fed's 2 percent target for inflation, which is based on the Commerce Department's Personal Consumption Expenditures (PCE) index. The December PCE will be released on Jan 26; the index was up 2.6 percent in November.

The central bank isn't expected to change interest rates when officials meet Jan 30-31. The last increase came in July, to a range between 5.25 percent and 5.5 percent, the highest level in 23 years.

"The concern that must be growing in the Fed's mind at this point is that we are now getting less deflation and disinflation from goods and energy prices, and we still have yet to see a measurable reduction in inflation in housing or most services components," Scott Anderson, chief US economist for BMO, wrote in a note Thursday, CNN reported.

The increase in the CPI in December was still far off its 40-year high of 9.1 percent in June 2022.

"Today's data shows that we ended 2023 with inflation down by nearly two thirds from its peak and core inflation at its lowest level since May 2021," US President Joe Biden posted on X.

Housing costs were the main reason as the index for shelter continued to rise in December, making up more than half of the monthly all-items increase. The energy index rose 0.4 percent as increases in electricity and gasoline offset a decrease in the natural gas index.

Gasoline prices, however, have been falling in January.

The average price of a gallon of gasoline dropped 3.8 cents from a week ago to $3.03 Wednesday, according to GasBuddy.com data.

The food index increased 0.2 percent in December. The index for food at home increased 0.1 percent, and the index for food away from home rose 0.3 percent.

The index for all items minus food and energy rose 0.3 percent in December, the BLS report said.

Indices that increased in December included motor vehicle insurance (up 20.3 percent, a 47-year high), shelter (6.2 percent), and medical care (0.6 percent).

"The behavior of the MVI (motor vehicle insurance) component of the CPI has truly been remarkable, and I don't see any evidence of near-term relief," Tom Simons, US economist at Jefferies, wrote in an email to Reuters.

Four of the six major indices in the grocery-store food group increased. The index for meat, poultry, fish and eggs rose 0.5 percent, with an 8.9 percent increase in the index for eggs.

The index for food away from home rose 5.2 percent over the year. The index for limited-service meals rose 5.9 percent, and the index for full-service meals rose 4.5 percent.

"Wages for lower-paid occupations like restaurant jobs are growing faster than the US average, creating price pressures that restaurants are passing on in higher prices," Bill Adams, chief economist at Comerica Bank, told The Wall Street Journal.

While wage gains have surpassed inflation recently, a November poll by The Associated Press-NORC Center for Public Affairs Research found that about three-quarters of those surveyed said the economy was poor, with two-thirds saying their expenses had increased.

"Our grocery bill has doubled," Megan Cherry, a psychologist who lives with her husband and children in Florida, told the AP. "We've got to change how much we get of each thing. Our kids noticed recently that, 'Wow, we eat a lot of chicken.' Well, because we can afford chicken."

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