Inflation is expected to have slowed again in the final month of 2022, a welcome downtrend in consumer prices after the Federal Reserve raised interest rates to the highest level in 15 years.
The Bureau of Labor Statistics’ December Consumer Price Index (CPI) is scheduled for release at 8:30 a.m. ET on Thursday.
Economists expect headline CPI rose 6.5% over the prior year in December, consensus estimates from Bloomberg show, a deceleration from the 7.1% increase seen in November. On a month-over-month basis, CPI likely fell 0.1%, according to the projections.
Core CPI, which removes the volatile food and energy components of the report and is closely tracked by the Fed, is also expected to have risen at a slower pace last month. Forecasts call for an annual reading of 5.7% last month after a 6% rise in November. Over the prior month, core CPI is expected to rise 0.3% after a 0.2% jump in November.
Policymakers monitor “core” inflation more closely due to its nuanced look at key inputs like housing, while the headline CPI figure has moved largely in tandem with volatile energy prices last year.
“Deconstructing inflation, core goods prices have stabilized, and shelter inflation is likely to turn in the next few months based on alternative indices,” Ronald Temple, chief market strategist at Lazard said in a note. “Services excluding shelter remain concerning as wages are a critical driver of price pressures.”
“Until we see sustained easing of labor market tightness, service inflation will remain a risk,” he said.
Thursday morning’s report is likely to dictate bets on whether the Federal Reserve raises interest rates by 0.25% or 0.50% at the start of next month.
The Federal Open Market Committee (FOMC), the group of Fed officials that vote on policy changes, is set to convene Jan. 31-Feb.a 1 and deliver the first rate increase of 2023 and eighth of the current hiking cycle.
Last month, officials raised interest rates by 50 basis points, bringing total increases to its benchmark policy rate to 4.25% in 2022.
(This post will be updated at 8:30 a.m. ET.)
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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