NewsGlobalUS Core CPI Rises 0.2% in December, Below Expectations as Inflation Shows Cooling TrendUS Core CPI Rises 0.2% in December, Below Expectations as Inflation Shows Cooling Trend
US core CPI increased 0.2% in December, below expectations, with the annual rate holding at 2.6% - a four-year low. The reading provides clearer evidence of cooling inflation after November's data was distorted by government shutdown effects. Shelter costs drove monthly gains while vehicle repair costs fell by record amounts, and the Federal Reserve is expected to pause rate cuts this month.
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US core inflation rose less than expected in December, providing clearer evidence that price pressures continue to cool after previous data was complicated by government shutdown distortions. The reading offers Federal Reserve officials more confidence in the disinflationary trend as they prepare for their upcoming policy meeting.
December Inflation Data
The core consumer price index, which excludes volatile food and energy categories, increased 0.2% from November according to Bureau of Labor Statistics data released Tuesday. This monthly gain fell below economist expectations for a larger rebound.
| Metric: | December Reading | Annual Rate |
|---|---|---|
| Core CPI Monthly: | +0.2% | - |
| Core CPI Annual: | - | 2.6% |
| Annual Comparison: | - | Four-year low |
The annual core CPI rate of 2.6% matched a four-year low, reinforcing signs that underlying inflation pressures are moderating.
Data Quality Improvements
December's reading provides more reliable insight into inflation trends compared to November's report, which faced significant measurement challenges. November data was artificially depressed due to a record-long government shutdown that prevented the Bureau of Labor Statistics from collecting October prices, leading to assumptions of no increases in key housing metrics.
Additional factors that complicated November's accuracy included:
- Later-than-usual data collection timing
- Potential effects from holiday discounts
- Measurement distortions across housing categories
Price Movement Breakdown
Shelter costs emerged as the "largest factor" driving December's overall monthly advance according to the Bureau of Labor Statistics. Apparel prices also contributed to the monthly increase.
| Category: | December Performance |
|---|---|
| Shelter Costs: | Largest monthly contributor |
| Apparel: | Price increases |
| Appliances: | Price declines |
| Used Vehicles: | Price declines |
| Vehicle Repairs: | Record decline |
Several categories showed price declines, including appliances and used cars and trucks. Vehicle repair costs fell by the most on record, providing significant downward pressure on the overall index.
Federal Reserve Implications
Federal Reserve officials are widely expected to hold interest rates steady at their upcoming meeting later this month, following three consecutive rate cuts that closed out 2025. The December inflation data supports the case for a pause as policymakers assess the effectiveness of previous easing measures.
Officials remain divided over the appropriate pace of future rate reductions, weighing competing economic pressures. Key considerations include potential inflationary effects from tariff policies against ongoing softness in labor market conditions.
Market Response
Financial markets responded positively to the inflation data, with stock futures jumping while Treasury yields declined following the report's release. The market reaction reflects investor relief that core inflation remained contained despite concerns about a potential rebound.
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