US Consumer Prices Expected to Stay Elevated at 2.6% in December Amid Data Recovery
US consumer prices are projected to rise 2.6% year-over-year in December, with monthly increases of 0.3% driven by higher electricity, grocery, and clothing costs. Core inflation is expected at 2.7% annually and 0.3% monthly. Data collection disruptions from a six-week government shutdown complicate December projections, with economists anticipating potential larger jumps as normal data gathering resumes.
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US consumer prices are expected to remain elevated in December, with inflation likely holding near recent levels as Americans continue facing higher costs for essential goods and services. The Labour Department is projected to report a 2.6% year-over-year increase in consumer prices for December, according to economists' estimates compiled by FactSet.
December Inflation Projections
The anticipated December figures reflect ongoing price pressures across multiple categories, with electricity, groceries, and clothing costs expected to have jumped during the month. Monthly price increases are forecast at 0.3%, a pace that exceeds the Federal Reserve's 2% annual inflation target.
| Inflation Metric: | December Projection | November Actual | Change |
|---|---|---|---|
| Annual CPI: | 2.6% | 2.7% | -0.1% |
| Monthly CPI: | 0.3% | - | - |
| Core Annual: | 2.7% | 2.6% | +0.1% |
| Core Monthly: | 0.3% | - | - |
Core prices, which exclude volatile food and energy categories, are expected to rise 0.3% monthly and 2.7% annually, representing an increase from November's 2.6% yearly figure.
Data Collection Challenges
December's inflation figures face unusual uncertainty due to disruptions from a six-week government shutdown that suspended price data collection used to compile inflation rates. Some economists anticipate the December report may show larger inflation jumps as the data collection process normalizes.
The shutdown's impact on data quality became evident in November's reporting, where most prices were collected in the second half of the month after government reopening. Holiday discounts during this period may have biased November's inflation reading lower, while placeholder estimates for rental prices potentially understated overall price pressures.
Broader Economic Context
Inflation has declined significantly from its four-decade peak of 9.1% reached in June 2022, but has remained stubbornly close to 3% since late 2023. Essential goods continue placing financial strain on consumers, with grocery costs approximately 25% higher than pre-pandemic levels. Other necessities including rent and clothing have also become more expensive.
Federal Reserve Policy Implications
The Federal Reserve faces ongoing challenges balancing inflation control with employment support. The central bank reduced its key rate by a quarter-point in December but indicated reluctance to implement further cuts while inflation remains above the 2% target. Fed Chair Jerome Powell stated the committee would likely pause additional rate reductions to assess economic developments.
The 19 members of the Fed's interest-rate-setting committee remain divided over future policy direction, with the key rate currently at approximately 3.6%. As long as inflation persists above target levels, significant rate cuts appear unlikely in the near term.
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