| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| CPI - M/M | 0.3% | 0.2% to 0.4% | 0.4% | 0.3% |
| CPI - Y/Y | 2.9% | 2.9% to 2.9% | 2.9% | 2.7% |
| Ex-Food & Energy- M/M | 0.3% | -0.1% to 0.3% | 0.2% | 0.3% |
| Ex-Food & Energy- Y/Y | 3.3% | 3.3% to 3.3% | 3.2% | 3.3% |
Highlights
The Consumer Price Index in December increased 0.4 percent, following a 0.3 percent increase in November, and after rising 0.2 percent in each of the previous 4 months. This compares to expectations for a 0.3 percent rise in the Econoday survey of forecasters.
Over the last 12 months, consumer prices are up 2.9 percent, compared to a 2.7 percent year-over-year rise in November. Expectations were for a 2.9 percent increase.
Core CPI, excluding food and energy prices, rose 0.2 percent, slowing down after rising by 0.3 percent in each of the previous four months. Consumer prices less food and energy rose 3.2 percent from the December 2023, after rising by 3.3 percent on an annual basis in November.
The data eases concern that the Federal Reserve will need to reverse course and begin hiking rates once again to combat inflation. Instead, this provides the central bank with more reason to hit pause on rate cuts at its January meeting.
After rising by 0.3 percent in November, shelter costs rose by the same rate in December. Food prices increased by 0.3 percent, building on a 0.4 percent jump in November, as grocery prices and restaurant prices each rose by 0.3 percent. Energy costs jumped 2.6 percent over the month, after being up 0.2 percent in November.
Energy prices are down 0.5 percent year-over-year, following a 3.2 percent decline for the 12 months ending November. Food prices increased 2.5 percent over the last year, after rising by 2.4 percent in November.
Over the last 12 months, consumer prices are up 2.9 percent, compared to a 2.7 percent year-over-year rise in November. Expectations were for a 2.9 percent increase.
Core CPI, excluding food and energy prices, rose 0.2 percent, slowing down after rising by 0.3 percent in each of the previous four months. Consumer prices less food and energy rose 3.2 percent from the December 2023, after rising by 3.3 percent on an annual basis in November.
The data eases concern that the Federal Reserve will need to reverse course and begin hiking rates once again to combat inflation. Instead, this provides the central bank with more reason to hit pause on rate cuts at its January meeting.
After rising by 0.3 percent in November, shelter costs rose by the same rate in December. Food prices increased by 0.3 percent, building on a 0.4 percent jump in November, as grocery prices and restaurant prices each rose by 0.3 percent. Energy costs jumped 2.6 percent over the month, after being up 0.2 percent in November.
Energy prices are down 0.5 percent year-over-year, following a 3.2 percent decline for the 12 months ending November. Food prices increased 2.5 percent over the last year, after rising by 2.4 percent in November.
Market Consensus Before Announcement
The consensus sees CPI up 0.3 percent in December on the month with a year on year rise of 2.9 percent. For CPI ex food & energy, the call is the same 0.3 percent increase on the month and up 3.3 percent on the year.
Definition
The CPI is a measure of the change in the average price level of a fixed basket of goods and services purchased by consumers. Monthly changes in the CPI represent the rate of inflation for the consumer. Annual inflation is also closely watched.
The consumer price index is available nationally by expenditure category and by commodity and service group for all urban consumers (CPI-U) and wage earners (CPI-W). All urban consumers are a more inclusive group. The CPI-U is the more widely quoted of the two, although cost-of-living contracts for unions and Social Security benefits are usually tied to the CPI-W, because it has a longer history. Monthly variations between the two are slight.
The CPI is also available by size of city, by region of the country, for cross-classifications of regions and population-size classes, and for many metropolitan areas. The regional and city CPIs are often used in local contracts.
The Bureau of Labor Statistics also produces a chain-weighted index called the Chained CPI. This measures a variable basket of goods and services whereas the regular CPI-U and CPI-W measure a fixed basket of goods and services. The Chained CPI is similar to the personal consumption expenditure price index that is closely monitored by the Federal Reserve Board.
The consumer price index is available nationally by expenditure category and by commodity and service group for all urban consumers (CPI-U) and wage earners (CPI-W). All urban consumers are a more inclusive group. The CPI-U is the more widely quoted of the two, although cost-of-living contracts for unions and Social Security benefits are usually tied to the CPI-W, because it has a longer history. Monthly variations between the two are slight.
The CPI is also available by size of city, by region of the country, for cross-classifications of regions and population-size classes, and for many metropolitan areas. The regional and city CPIs are often used in local contracts.
The Bureau of Labor Statistics also produces a chain-weighted index called the Chained CPI. This measures a variable basket of goods and services whereas the regular CPI-U and CPI-W measure a fixed basket of goods and services. The Chained CPI is similar to the personal consumption expenditure price index that is closely monitored by the Federal Reserve Board.
Description
The consumer price index is the most widely followed monthly indicator of inflation. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact.
Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets- and your investments.
If someone borrows $100 dollars from you today and promises to repay it in one year with interest, how much interest should you charge? The answer depends largely on inflation as you know the $100 will not be able to buy the same amount of goods and services a year from now. The CPI tells us that prices rose 4.2 percent in the U.S. over 2007. To recoup your purchasing power, you would have to charge 4.2 percent interest. You might want to add one or two percentage points to cover default and other risks, but inflation remains the key factor behind the interest rate you charge.
Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets- and your investments.
If someone borrows $100 dollars from you today and promises to repay it in one year with interest, how much interest should you charge? The answer depends largely on inflation as you know the $100 will not be able to buy the same amount of goods and services a year from now. The CPI tells us that prices rose 4.2 percent in the U.S. over 2007. To recoup your purchasing power, you would have to charge 4.2 percent interest. You might want to add one or two percentage points to cover default and other risks, but inflation remains the key factor behind the interest rate you charge.
Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
