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Prices rose 0.4% in December from the previous month, up from
0.2% in November, the Commerce Department said Friday in a
report that was delayed by the six-week government shutdown last
fall. The monthly increase was the highest since last February.
Compared with a year ago, inflation rose 2.9% in December, up
from 2.8% in November. That is the largest yearly increase since
March 2024.
Core prices — which exclude the volatile food and energy
categories — also rose 0.4% in December from the previous month,
up from 0.2% in November. That is also the highest since last
February. Core prices jumped 3% in December from a year ago,
faster than November’s 2.8% increase.
The figures show that inflation remains elevated, though it's
down from a peak of near 7% in 2022. With many prices still
rising more quickly than they did before the pandemic, the
report points to a key reason that many Americans remain unhappy
with the economy, even as unemployment remains low and growth is
solid.
The report covers what is known as the personal consumption
expenditures (PCE) price index, which the Federal Reserve
prefers over the better-known consumer price index. The CPI
cooled noticeably in January, the government said last week.
But the reason the PCE index is running higher than the consumer
price index is because it puts much less weight on some areas
where price growth has sharply cooled, such as apartment rents
and car prices.
Friday’s report also showed that consumers kept spending at a
solid clip in December, when spending rose 0.4% from the
previous month, the same as in November.
In December, prices climbed for furniture, clothing, and
groceries. Gas prices fell, but the cost of electricity rose and
natural gas costs soared 3.7% just in December from the previous
month.
The Fed’s interest-rate setting committee met in late January
and agreed to keep its short-term rate unchanged at about 3.6%
despite repeated demands from President Donald Trump to reduce
it. According to minutes from the meeting released Wednesday,
most officials want to see inflation fall closer to the Fed’s
target before supporting further rate cuts.
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