US consumer prices rose slightly above expectations in December From Reuters

WASHINGTON (Reuters) – U.S. consumer prices rose slightly more than expected in December amid higher costs for energy goods, pointing to still-elevated inflation that was in line with projections from the Federal Reserve for fewer interest rate cuts this year.

The consumer price index rose 0.4% last month after climbing 0.3% in November, the Labor Department’s Bureau of Statistics said Wednesday. In the 12 months to December, the CPI advanced 2.9% after increasing 2.7% in November.

Economists polled by Reuters had expected the CPI to gain 0.3% and grow 2.9% year-on-year.

Progress in bringing inflation to the US central bank’s 2% target slowed in the second half of last year.

A resilient economy, the threat of broad tariffs on imported goods and mass deportations of undocumented immigrants – actions that are considered inflationary – have also led the US central bank to project a more shallow rate path this year.

The incoming administration of President-elect Donald Trump has also promised tax cuts, which will boost the economy.

Consumer inflation expectations rose in January, with households concerned that tariffs would increase the price of goods.

Excluding volatile food and energy components, the CPI rose 0.2% in December. The so-called core CPI had risen 0.3% for four consecutive months. In the 12 months to December, the so-called core CPI increased 3.2% after rising 3.3% in November.

No rate cut is expected at the Fed’s January 28-29 policy meeting. While economists see fewer rate cuts this year, they are divided on whether the central bank will reduce borrowing costs again before the second half of the year.

Goldman Sachs expects two rate cuts this year, in June and December, a revised number of three. Bank of America Securities believes the Fed’s easing cycle is over.

The central bank started its easing cycle in September and cut its benchmark interest rate by 100 basis points to the current range of 4.50%-4.75%.

The last reduction was in December when politicians also projected two rate cuts this year instead of the four they had planned in September. The policy rate was increased by 5.25 percentage points between March 2022 and July 2023.