US inflation slowed to 6.5% in December, marking the sixth straight monthly deceleration since a mid-2022 peak and reducing pressure for aggressive rate hikes from the Federal Reserve.
Excluding food and energy, the consumer price index rose 0.3% last month and was up 5.7% from a year earlier, according to a Labor Department report Thursday. Economists see the gauge — known as the core CPI — as a better indicator of underlying inflation than the headline measure.
The overall CPI fell 0.1% from the prior month, with cheaper energy costs fueling the first decline in 2 1/2 years. The measure was up 6.5% from a year earlier.
The softer readings add to growing signs that the worst inflation bout in four decades is gradually waning. Still, the Fed doesn’t expect inflation to slow enough to get close to its 2% target until well into 2024. The central bank is expected to raise its benchmark rate by at least a quarter-point when it next meets at the end of this month.
Even as it gradually slows, inflation remains a painful reality for many Americans, especially with such necessities as food, energy and rents having soared over the past 18 months.
For now, inflation is falling, with the national average price of a gallon of gas declining from a $5 a gallon peak in June to $3.27 a gallon as of Wednesday, according to AAA.
S&P 500 futures rose in choppy trading today after a key inflation reading came in line with expectations.
At 8:37 am ET, Dow e-minis were up 66 points, or 0.19%, S&P 500 e-minis were up 5.25 points, or 0.13%, and Nasdaq 100 e-minis were down 12 points, or 0.1%.
Moments before the data, Dow e-minis were up 126 points, or 0.37%, S&P 500 e-minis were up 16.25 points, or 0.41%, and Nasdaq 100 e-minis were up 39.75 points, or 0.35%.
The US CPI data will have a big impact on oil and the wider market by shaping expectations of the speed of interest rate hikes in the world's biggest economy.
Economists expected the rise in core US consumer prices to have slowed to an annual pace of 5.7% in December, versus 6% a month earlier. Month-on-month headline inflation was seen at zero.
The market is also bracing for an additional curb on Russian oil supply due to sanctions over its invasion of Ukraine.
Gold climbed ahead of the data, which may determine whether its two-month uptrend continues.
Bitcoin gained for a ninth day, the longest winning streak for the world’s largest crypto token since 2020.
