December Inflation clouds Fed’s outlook on interest rate cuts

Gas prices mainly contributed to the increase in inflation in December. (iStock:)

Annual inflation rose to 2.9% in December, modestly above the 2.7% annual rate; of the previous monthby consumer price index (CPI) published by the Bureau of Labor Statistics (BLS).

In December, inflation increased by 0.4% month-on-month, slightly exceeding expectations. Core CPI, which excludes food and energy, rose 0.2% in December, missing estimates after four consecutive months of 0.3% growth. This brought the year-over-year figure to 3.2%.

Energy prices increased by 2.6% and were the most significant contributor to December’s monthly increase, accounting for about 40% of the monthly increase in all commodities.Gas rose by 4.4% over the month. Food prices continued to rise, rising 0.3% last month, following a 0.4% rise in November.

“The December CPI report brings a mix of news, including a glimmer of optimism,” US First Senior Economist Sam Williamson said in a statement. monthly growth slowed to below expectations.

“This negative surprise in core CPI is encouraging, but one month does not set a trend,” Williamson continued.

The Federal Reserve cut interest rates by a quarter of a percentage point in December. 4.25% to 4.5%but minutes from the Federal Open Market Committee The meeting showed growing concern about higher inflation and a clear divide among Fed members on whether to continue raising interest rates. It was close, the minutes said.The Fed’s next meeting will be on January 28 and 29.

“The December CPI numbers show that inflation is not cooling at a pace that meets the Fed’s target,” said Ryan Marshall, CEO of Voxtur Analytics will cut rates very much in 2025, now readjusting forecasts to expect lower rates this year.”

If you’re struggling with high inflation, you may want to consider taking out a personal loan to pay off debt at a lower interest rate, reducing your monthly payments. Visit Credible to find your personalized rate without affecting your credit score.

BIDEN CANCELS STUDENT LOANS WITH ONE WEEK LEFT.

Shelter costs remain high

According to Daniel Hale, chief economist at Realtor.com, housing costs rose 0.3% month-over-month, the same pace as last month, which helped push the annual inflation rate down to 4.6% from 4.7% the previous month. :

Despite modest progress, housing costs remain below their pre-pandemic range of 3.3%, according to Hale. The increased costs are likely to prevent further rate cuts, affecting longer-term interest rates such as mortgage rates, which remain slightly below 7%.

“The market is now unlikely to cut until June,” Hale said in a statement was on firmer footing than it seemed three to six months ago, the Fed, is likely to be patient, especially if inflation continues to hover just above target.”

If you want to buy a house, consider Credible find the best mortgage rate for your financial situation.

FHFA ANNOUNCES HIGHER 2025 MORTGAGE LIMITS

Housing prospects are fluctuating

High mortgage rates will further disrupt the housing market, despite willing buyers, according to Hale.Home ownership remains a central goal for roughly 75% of Americans polled by Realtor.combut affordability remains a major concern for many.

“Existing home sales have improved in recent months following the fall’s low mortgage rates, but as interest rates have risen again, our expectations for home sales have declined,” Haley said.

What’s in store for housing is more of the same in terms of mortgage rates, and housing prices are expected to continue to rise.One bright spot is that incoming Pres Donald Trump administration could stimulate greater economic growth and thus higher incomes by giving Americans more purchasing power.Furthermore, lower household tax rates are expected to boost disposable household income even if incomes do not rise. Realtor.com Housing Forecast.

“Realtor.com’s housing forecast for 2025 expects a modest decline in mortgage rates to support a modest increase in home sales,” Haley said. “Every drop in the inflation rate will help bring that expectation closer to reality.”

If you think you’re ready to shop for a home loan, use Credible to help you quickly compare rates from multiple lenders within minutes.

THIS YEAR’S SOCIAL SECURITY PAYMENTS WILL FIND MODERATE COSTS OF LIVING.

Have questions about your finances but don’t know who to ask? Send an email moneyexpert@credible.com and your question can be answered by Credible in our Money Expert column.