US inflation continues to rise, complicating the Federal Reserve’s plans for interest rate cuts this year
Washington: So, the latest news is that US consumer prices aren’t cooling off at all. In fact, they went up again in December, mainly due to rising energy costs. This is making it tough for the Federal Reserve to cut interest rates significantly this year.
The consumer price index jumped by 0.4% last month, following a 0.3% rise in November. Over the past year, it’s up 2.9%, which is a bit higher than what some economists expected.
It seems like the Fed’s goal of getting inflation back down to 2% is hitting some bumps. But there’s a silver lining: the core CPI, which leaves out food and energy prices, actually dropped to 3.2%. That’s a little better than the forecast.
This news sent Dow Jones futures soaring by over 600 points before the market opened. Some categories, like personal care and communication, saw prices drop, but others like rent and medical care are still climbing.
Energy prices are a big part of the problem, with gasoline prices shooting up by 4.4% last month. The economy is holding strong, but there are concerns about tariffs and immigration policies that could keep inflation high.
With all this, the Fed isn’t expected to cut rates at their upcoming meeting. While some economists think there might be a couple of cuts later this year, opinions are mixed on when that might happen.
Goldman Sachs is betting on two cuts in June and December, while others think the Fed might be done easing for now. They’ve already lowered rates by a full percentage point since last September.
So, it’s a bit of a waiting game to see how this all plays out in the coming months.
