Inflation in December was even lower than first reported, the government says

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People shop in a supermarket in Manhattan in New York City on January 27, 2024.

Charlie Triballeau | AFP| Getty Images

The prices consumers pay in the market rose at an even slower pace than first reported, according to closely watched revisions released by the government Friday.

Revisions to the consumer price index showed that the broad basket of goods and services increased 0.2% in the month, less than the 0.3% initially reported, the Labor Department’s Bureau of Labor Statistics said. .

Although the change is small, it helped confirm that inflation was easing as 2023 ended, giving the Federal Reserve more room to start cutting interest rates later this year. -year.

The revisions are done as usual to the BLS, but they got more attention this year after the market reacted strongly to last year’s changes. Signs that inflation rose more than expected in 2022 led to higher Treasury yields and fueled investor concern that the Fed may keep monetary policy tighter.

Excluding food and energy, core CPI increased 0.3% for the month, the same as initially reported. Fed policymakers tend to focus more on core measures because they provide a better indication of long-term trends in inflation.

Also, November’s headline reading was revised higher, up 0.2% compared to the first estimate of 0.1%.

The revisions were a “damp squib,” said Paul Ashworth, chief North American economist at Capital Economics, although they could have some impact on the Fed.

“Because some Fed officials appeared to be worried about a repeat of last year – when the review upped the monthly changes in core prices in the final months of last year – the lack of meaningful change this year, at least at the margin, supports an earlier rate cut in May,” Ashworth said.

The Fed prioritizes the personal consumption expenditure price index as the main measure of inflation. CPI readings include the Commerce Department’s PCE calculations. The difference between the two measures is basically that CPI shows how much things cost while PCE adjusts for what consumers buy, accounting for changes in their behavior when prices rise and fall.

Futures market prices were little changed after the data was released.

Traders still largely expect the Fed to hold its overnight lending rate steady when it next meets in March, then cut it in May, followed by four more quarter-percentage-point reductions by the end of the year, according to CME Group projections.

Reuters contributed to this report.

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