U.S. inflation cooled in December as the economy showed signs of weakening. Inflation eased to 6.5% from 12 months ago.
The number was in line with analysts’ expectations and down from 7.1% seen in November. On a month-on-month basis, inflation eased 0.1% in December, as expected.
A slower rate of inflation could signal to the Federal Reserve that its interest rate . Hikes are working but, so far, Chair Jerome Powell has not indicated any near-term plans to . Scale back those hikes until inflation approaches 2. %
The economy continues to be driven by a strong labor market. Last week, the Bureau of Labor Statistics reported. That the unemployment rate hit a 53-year low, falling to 3.5%, but the difficulty companies are. Facing in finding workers is still reflected in the 10.5 million job openings. .
While that number is down. From post-pandemic highs, it’s forcing many employers to raise wages. That’s good news for workers, but some Federal Reserve officials . Say they believe these pay increases are likely translating into. Higher prices for consumers.
“To be clear, strong wage growth is a good thing,” Powell said at a conference in November. “But for wage growth to be sustainable, it needs to be in line with 2% inflation,” he added.
Where did the price drop in the US economy?
In December, gasoline prices fell to levels last seen before the outbreak of war in Ukraine, at around $3.10 a gallon.
BLS data on Thursday showed a 9.4% monthly decline for gasoline prices in December.
An index that tracks prices among small. Businesses has also halted its alarming pace of growth. Although it remains above pre-pandemic levels.
Prices of goods and services purchased online were 1.6% lower in. December than a year earlier – the fourth . Straight month of annual price declines, according to data from Adobe Analytics. It said holiday discounts . lowered prices on appliances, electronics, toys, computers and sporting goods. While price increases in categories such as personal care cooled.
Food prices have proven more stubborn, thanks to extreme weather events. Bird flu and labor shortages that have . Affected the cost of growing crops and supplying groceries.
Thursday’s BLS data showed food prices rose 0.3% on a monthly basis in December.
But on Wednesday, food giant Conagra, which makes the Healthy Choice, Bird’s Eye and . Chef Birdie brands, told Reuters it plans to stop raising prices. For snacks and frozen meals after the current quarter.
Economists at Bank of America say Thursday’s inflation report makes it unlikely. Fed officials will abandon plans to aggressively slow . The economy by raising interest rates.
“While there are growing signs that inflation has peaked. The Fed remains concerned about. the labor market overheating,” they said in a report this week. “Our outlook for the December [inflation] report is unlikely to assuage those concerns