WASHINGTON (AP) — U.S. inflation accelerated last month as prices for gas, eggs, and used cars rose, yet underlying price pressures also showed signs of easing, bolstering hopes that the Federal Reserve could still cut its key interest rate this year.
The consumer price index rose 2.9% in December from a year ago, Wednesday’s report from the Labor Department showed, up from 2.7% in November. It was the third straight increase after inflation fell to a 3 1/2 year low of 2.4% in September.
Yet excluding the volatile food and energy categories, so-called core inflation declined to 3.2% after remaining frozen at 3.3% for three months. Economists pay close attention to core prices because they typically provide a better guide of inflation’s future course.
The report presents a mixed picture, with consumers still grappling with high prices for essentials such as groceries, housing, and some services such as air fares. At the same time, increases in apartment rental prices are slowly easing and clothing costs barely rose last month. If core prices continue to match December’s pace, inflation should move closer to the Fed’s 2% target.
The report shows that core inflation “is on the downslope,” said Mike Skordeles, head of U.S. economics at Truist, a bank. “If the trends continue, the Fed might still end up cutting at some point.”