In December, the CPI inflation rate decreased to 3.2%, which was lower than anticipated.
Although consumer prices for a variety of products and services increased once more in December 2024 ended with somewhat improved inflation data, especially in the housing sector.
The Bureau of Labor Statistics said Wednesday that the 12-month inflation rate was 2.9% after the consumer price index rose 0.4% seasonally adjusted5 for the month. Dow Jones polled economists who were hoping for readings of 2.9% and 0.3%, respectively.
U.S. consumer price index
Year-over-year percent change | Jan. 2021–Dec. 2024

The core CPI annual rate, excluding food and energy, was 3.2%, which was somewhat better than the 3.3% anticipated and lower than the previous month. Monthly, the core measure increased by 0.2%, which was 0.1 percentage points below expectations.
The CPI’s increase was mostly due to a 2.6% increase in monthly energy prices, which were driven up by a 4.4% increase in gasoline prices. According to the BLS, that accounted for almost 40% of the index’s rise. The cost of food also increased, going up 0.3% for the month.
In 2024, food increased by 2.5% annually, but energy decreased by 0.5%.
U.S. consumer price index
Month-over-month percent change | Jan. 2021–Dec. 2024

Although they increased by 0.3%, shelter prices—which make up over one-third of the CPI weighting—were up 4.6% from the previous year, the weakest one-year gain since January 2022. Prices for services other than rent increased by 4% over the previous year, which is the slowest increase since February 2024.
After the publication, Treasury yields fell and stock market futures soared.
The figures indicate that the Federal Reserve still has work to do to meet its 2% inflation target, even though they compared favorably to projections. While core inflation was 3.9% a year ago, headline inflation decreased from its 3.3% pace in 2023.
The CPI for today might make the Fed feel a bit more dovish. “It should reduce some of the talk about the Fed possibly raising rates, but it won’t change expectations for a pause later this month,” Morgan Stanley Wealth Management chief economic strategist Ellen Zentner said. Additionally, based on the market’s first reaction, investors seemed relieved following a few months of higher inflation data.
When the Fed holds its policy meeting later this month, the inflation readings from this week—the BLS released its product price index on Tuesday—are anticipated to keep it on hold.
Although the market applauded the release of the CPI, workers received less encouraging news: In a separate statement, the BLS stated that the month-over-year improvement was only 1% due to a 0.2% decline in inflation-adjusted hourly earnings.
Other than that, the inflation report’s details were inconsistent.
While the price of new cars increased by 0.5%, the price of used cars and trucks increased by 1.2%. Egg prices were up 3.2%, bringing the yearly rise to 36.8%, while transportation services increased 0.5% and were up 7.3% year over year. Annually, auto insurance increased by 11.3% and by 0.4%.
“The inflation rate is currently dealing with a ‘last mile’ issue, where progress in lowering price pressures has slowed,” stated Sung Won Sohn, chief economist of SS Economics and a professor at Loyola Marymount University. “The basic causes of inflation, such as food, shelter, cars, and petrol, continue to be recurring issues. Nonetheless, there are indications that long-term inflationary pressures would continue to decline, helped by slowing trends in important areas like labor and housing prices.
Markets are wary of the inflation situation and the Fed’s possible reaction when the report is released. Inflation worries have grown as a result of President-elect Donald Trump’s promises of tariffs and mass deportations.
The 256,000-job gain in December was significantly higher than economists had predicted, which heightened worries that the Fed may remain on hold for a long time and maybe consider raising interest rates if inflation turns out to be more persistent than anticipated.
Inflation is not significantly slowing down, but it is also not showing any indications of reaccelerating, according to the December CPI report and a comparatively weak estimate on wholesale prices on Tuesday.
The New York Fed released a different report on Wednesday that indicated a slowdown in manufacturing activity but a significant increase in prices paid and received.
According to data from the CME Group, futures prices pointed more positively toward two rate decreases during the year, assuming quarter percentage point increments, but still implied a near certainty that the Fed would remain on hold at its Jan. 28–29 meeting. The next cut is anticipated by markets to occur in May or June.
The Fed’s main inflation forecasting tool is the personal consumption expenditures price index, which is provided by the Commerce Department. Nonetheless, the PPI and CPI metrics are taken into account in that computation.
According to Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, the two estimates probably indicate that the core PCE would increase by just 0.2% in December, maintaining the annual pace at 2.8%.