The December 2024 Consumer Price Index of All Urban Consumers (CPI-U) report indicates that inflation increased by 0.3% for the month, surpassing November’s 0.2% rise. These data were released at 8:30 am EST on Wednesday, January 15, 2025, by the Bureau of Labor Statistics. Before seasonal adjustment, the year-over-year (Y-o-Y) inflation rate in the all-items index grew by 2.9%, a rise from the 2.7% and 2.6% witnessed in November and October.
Despite the monthly acceleration, the results matched or missed economists’ consensus estimates. The table below is courtesy of Investing.com. The left column represents December’s figures, while the right column represents forecasters’ expectations. As you can see, a weaker-than-expected core CPI was the headliner.
The data may be a relief for FOMC Chairman Jerome Powell, as the committee shifted from a dovish labor-market-driven tone to a hawkish inflation-driven tone. He said during his post-meeting press conference on Dec. 18:
“Inflation itself is way down, but people are still feeling high prices. The best we can do for them is to get inflation back down to its target and keep it there so that people are earning, you know, big, real wage increases so that their, their wages are going up, their compensation is going up faster than inflation year upon year upon year. And that’s what will restore people’s good feeling about the economy. That’s what it will take, and that’s what we’re aiming for.”
Used cars and trucks were the primary outlier again this month, with the segment rising by 1.2% MoM in December. Similarly, energy-related items like gasoline and utilities recorded significant increases.
Core inflation (which excludes the impacts of food and energy), rose by 0.2% in December, a decline from November’s 0.3% print. Moreover, with real-time rents down sharply on an annual basis, a weaker shelter component should aid the core CPI in the months ahead.
Food Prices
The food index slowed in December, rising by 0.3% versus 0.4% in November. Four of the six major grocery store food indexes increased:
- Cereals and bakery products (+1.2%)
- Meats, poultry, fish, and eggs (+0.6%)
- Dairy and related products (+0.2%)
- Fruits and vegetables (-0.1%)
- Nonalcoholic beverages (-0.4%)
- Other food at home (+0.3%)
In addition, the food away from home index rose by 0.3%, as restaurants priced their products in line with overall food inflation.
Energy Prices
The energy index rose by 2.6% in December, a noticeable jump from the 0.2% recorded in November. Gasoline and natural gas prices rose by 4.4% and 2.4%, respectively, while electricity rose by 0.3%.
Core CPI December 2024
The December core CPI rose by 0.2% month-over-month and 3.2% Y-o-Y. Below is an itemized breakdown of the main price fluctuations seen in the core CPI reading:
- Shelter index: (+0.3%) [November: +0.3%]
- Rent index: (+0.3%) [November: +0.2%]
- Owners’ equivalent rent: (+0.3%) [November: +0.2%]
- Motor vehicle insurance: (+0.4%) [November: +0.1%]
- Medical care services: (+0.2%) [November: +0.4%]
- Physician services: (+0.1%) [November: +0.3%]
- Hospital services: (+0.2%) [November: +0.0%]
- Airline fares: (+3.9%) [November: +0.4%]
Seasonally Unadjusted CPI Data for December 2024
Before seasonal adjustments, the CPI-U for December 2024 increased by 2.9% Y-o-Y to an index level of 315.605. Since these figures are unadjusted, they include regular seasonal price fluctuations that can create volatility in the results.
Too Hawkish?
With the FOMC shifting its stance in a hawkish direction on Dec. 18, inflation had taken precedence over the labor market. Powell added:
“You saw in the SEP that risks and uncertainty around inflation we see as higher. Nonetheless, we see ourselves as still on track to continue to cut. I think the actual cuts that we make next year will not be because of anything we wrote down today. We’re, we’re going to react to data. That’s just the general sense of what the Committee thinks is likely to be appropriate.”
To explain, the FOMC releases its Summary of Economic Projections (SEP) four times per year, and include members’ forecasts for GDP growth, inflation, unemployment, and the federal funds rate (FFR).
If you analyze the red box below, you can see that the consensus estimate was for 100 basis points of rate cuts and a 3.4% FFR in 2025. But, with economic data outperforming, the FFR projection was increased to 3.9%, which means only 50 basis points of rate cuts.
Add it all up, and the hawkish shift implies stricter monetary policy throughout 2025. Yet, with the core CPI data underperforming today, more of the same could lead to a shift back to dovish projections in the months ahead.
In the meantime, asset prices have suffered recently, as higher interest rates on risk-free assets like Treasury bonds make risky assets like stocks, gold, and silver seem less appealing.
However, Goldman Sachs and Bank of America still expect the yellow metal to exceed $2,800 and post a new record high in 2025. If you analyze the Bloomberg chart below, you can see that both investment banks see gold maintaining its strength throughout the year.
Are you thinking about diversifying into precious metals? Talk to your financial advisor about initiating a gold IRA account today, allowing you to invest in this red-hot asset on a tax-advantaged basis. Additionally, our complimentary CPI inflation calculator remains at your disposal, enabling you to assess inflation’s impact on your finances. Remember, seek the guidance of a financial advisor before making any investment decision.
Alex Demolitor is a Canadian financial writer hailing from Halifax, NS. Alex has a Bachelors Degree from King's College and passed the CFA Exam Level III. He specializes in fundamental analysis of the stock, bond, commodity, and FX markets. He also covers US & Canadian economic indicators.
