US Inflation (CPI) - Improving Trend

Written by Philip Rich, Chief Investment Officer,  January 11, 2023.

The “all items” CPI index came in at 6.5% (YOY) for December, down from 9.1% last June. The month-over-month index was actually negative. The decline stems primarily from a decrease in energy prices, especially gasoline. “Core” inflation (less food and energy) declined to 5.7%, down from 6.6% last September. Core inflation is not decelerating as fast as the
broader index, but it is trending in the right direction. The cost of shelter, home furnishings, car insurance, recreation, and apparel increased. The cost of used cars and trucks and airline fares decelerated. Inflation is not yet close to the Fed’s stated target of 2%, but it has been moving in the right direction for several months now. If the inflation numbers continue to improve, they could offer the Fed an opportunity to slow down the pace of future increases in interest rates.

US Inflation Slows in December

• 6.5% YOY compares favorably to 9.1% in June

• Month-over-month decline in the “all items” index

• Price declines in energy and gasoline were primary drivers

• Core inflation (less food and energy) declined to 5.7% (YOY)

• Inflation not defeated yet, but Fed may take note of progress