By Christopher Rugaber, economy writer of Associated Press
Washington (AP) – An inflation meter closely observed by the Federal Reserve increased slightly last month, while some underlying price pressures showed signs of decrease.
The latest inflation figures arrive as President Donald Trump has threatened To impose large import taxes on the assets of Canada and Mexico, potentially affecting everything from Automents to avocadosthat could raise the highest prices in the coming months.
Friday report From the Department of Commerce, it showed that consumer prices increased 2.6% in December of the previous year, above an annual rate of 2.4% in November and the third consecutive increase. Excluding the volatile food and energy categories, central prices increased 2.8% compared to a year ago, as in November and October.
However, there were some positive signs in Wednesday’s report. When measured in shorter time frames, inflation is slowing down: in December, central prices increased 0.2% from the previous month, a rhythm that is almost consistent with the annual objective of Fed. Economists, and Fed officials, pay close attention to central prices because they provide better reading about where inflation is directed.
The figures arrive only two days after the Federal Reserve officials, led by President Jerome Powell, decided Pause your interest rate cuts In part because inflation has largely stuck in approximately 2.5%, above its 2%target, during the last six months.
In the last three months, central prices have increased at an annual rate of only 2.2%, below 2.6% in November.
Many companies increase prices at the beginning of the year, which could increase inflation a bit when January figures are launched next month. But the preferred Fed meter should constantly decrease in the coming months, economists say, since the highest inflation readings at the beginning of last year fall with figures year after year.
“However, beyond that, the growing risk of Trump to impose tariffs a little earlier than we assume that it has an upward risk for inflation,” said Paul Ashworth, chief economist of North America of Capital Economics, a Forecast signature, in a written note.
General inflation rose 0.3% in December since the previous month, augmented by a jump in gasoline prices. The monthly increases at that level, if they continue, would exceed the objective of the Fed.
The report of the Department of Commerce also showed that consumer spending increased a healthy 0.7% in December since the previous month, partly fed by constant salary earnings and higher prices of actions and values of housing. Income increased 0.4%, the government said. With the expense exceeded by income, the savings rate fell to 3.8% of 4.1%.
Americans specifically increased goods spending, such as electronics and furniture, probably a sign that consumers are buying more manufactured products, many of which are imported, before the potential imposition of rates Trump has threatened to implement.
Underlying trends point to lower inflation ahead. Apartment rental prices and other housing costs are slowly moderated. And a slow labor market has meant that salary growth has been reduced, which means that companies are under less pressure to increase prices to compensate for higher labor costs.
“It seems that we are prepared for greater progress,” Powell said Wednesday at a press conference, referring to inflation. “But being ‘seems to prepare for’ is one thing, having it is another. So we will want to see greater progress in inflation.”
Until then, Powell suggested, the Fed is likely to maintain its key rate in approximately 4.3%, a complete percentage point from a two decades last year before three cuts at the end of 2024. The Fed hopes that indebtedness costs higher weigh on spending and knocking down inflation even more.
Meanwhile, consumers promoted strong growth in the last three months of last year, when the economy expanded to a solid annual rate of 2.3%. The growth was stronger in the quarter from July to September, with 3.1%, but the expansion of the fourth quarter was delayed by a strong reduction in commercial inventories, which should be reversed in the next quarters.
Originally published: