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US Consumer Prices Demonstrate Growth

By the end of 2023, the United States recorded an increase in consumer prices of 3.4% year-on-year.

US Consumer Prices Demonstrate Growth

Last year was a period of efforts for Washington aimed at curbing inflation. Currently, in the United States, the growth rates of the cost of goods and services are quite far from the government’s targets.

The consumer price index in the US increased by 0.3% in December compared with the result for November. This dynamic meets the expectations of experts. Data on consumer price growth in December were released by the Bureau of Labor Statistics on Thursday, January 11.

Monthly and annual figures for December were higher than in November when the dynamic cost of goods and services was influenced by such a deterrent factor as falling gas prices. Last month, the cost of gas was mostly neutral. The increase in shelter costs amounted to more than half of the monthly increase in all items.

Economists had predicted that the overall annual inflation rate would be fixed at 3.2% in December, after 3.1% in November. The annual figure of growth in the cost of goods and services last month decreased significantly compared to the result for the same period in 2022 when this indicator was 6.5%.

Excluding the more volatile categories of food and gas, the core consumer price index was 3.9% last month. In November, this figure was 4%.

The data published on Thursday may, on a cursory examination, seem like some kind of example of a complex and confusing process of reducing inflation. At the same time, when recalculating the data for recent months in annual terms, it turns out that the current consumer price index shows progress in achieving the Federal Reserve’s goal.

At the same time, some experts believe that the December report is probably a signal that the Fed will not cut interest rates in the foreseeable future. Brian Coulton, chief economist at Fitch Ratings, says that core inflation remains volatile, which is why changes in the policy of the financial regulator will not be as rapid as markets expect.

In recent months, there have also been signs of normalization of supply chains. Moreover, during this period, the prices of commodities decreased and the cost structure stabilized.

Prices for core services increased by 0.4% month-on-month in December and showed a growth of 5.3% compared to the same period in 2022. Inflation in this sector is more stable because it is influenced by many factors, including wages and other labor costs. Rising shelter costs have triggered an increase in prices for core services. The cost of these properties continues to remain high because of low inventory. At the same time, rents stabilized in December.

Fed officials pay special attention to prices for services, which are a kind of indicator of the sustainability of the process of returning inflation to the financial regulator’s target of 2%.

Seema Shah, chief global strategist at Principal Asset Management, says that the December report contains not bad figures, but at the same time, the rate of decline in the growth in the cost of goods and services is still slow. According to the expert, the Fed will keep pushing back on the idea of an imminent reduction in interest rates as long as inflation in the shelter sector remains stubbornly high.

New York Fed President John Williams said on Wednesday, January 10, that the dynamic growth in the cost of goods and services has clearly decreased from its more than 40-year peak in mid-2022 and is showing progress. At the same time, he did not hold forth on when the period most suitable for lowering interest rates would come. In his opinion, the restrictive policy is likely to remain in force for some time.

Fed Governor Michelle Bowman and Dallas Fed President Lorie Logan are skeptical about the prospects for an early reduction in interest rates, noting that they will not hesitate to continue to increase this indicator in the event of a further increase in inflation.

The unemployment rate in the United States is currently below 4%. Consumers continue to spend despite clear signs of an increase in debt burden and contracting savings.

As we have reported earlier, Janet Yellen Says About US Considerable Progress in Reducing Inflation.