UNITED STATES NEWS

US inflation edges up, fueled by food and housing prices, but many other costs rise only mildly

Jan 10, 2024, 4:35 PM

FILE - A television screen shows the rate decision of the Federal Reserve as traders work on the fl...

FILE - A television screen shows the rate decision of the Federal Reserve as traders work on the floor of the New York Stock Exchange, Nov. 1, 2023. Inflation has kept slowing, and the economy has withstood the strain of the accumulated higher borrowing costs. On Thursday, Jan. 11, 2024, the Labor Department is expected to report that underlying inflationary pressures eased further in December 2023. (AP Photo/Richard Drew, File)
Credit: ASSOCIATED PRESS

(AP Photo/Richard Drew, File)

WASHINGTON (AP) — Higher rents and food prices boosted overall U.S. inflation in December, a sign that the Federal Reserve’s drive to slow inflation to its 2% target may be a bumpy one.

Thursday’s report from the Labor Department showed that overall prices rose 0.3% from November and 3.4% from 12 months earlier. Those gains exceeded the previous 0.1% monthly rise and the 3.1% annual inflation in November.

Excluding volatile food and energy costs, so-called core prices rose just 0.3% month over month, unchanged from November’s increase. Core prices were up 3.9% from a year earlier, down a tick from November’s 4% year-over year gain. Economists pay particular attention to core prices because, by excluding costs that typically jump around from month to month, they are seen as a better guide to the likely path of inflation.

Overall inflation has cooled more or less steadily since hitting a four-decade high of 9.1% in mid-2022. Still, the persistence of still-elevated inflation helps explain why, despite steady economic growth, low unemployment and healthy hiring, polls show many Americans are dissatisfied with the economy — a likely key issue in the 2024 elections.

The Federal Reserve, which began aggressively raising interest rates in March 2022 to try to slow the pace of price increases, wants to reduce year-over-year inflation to its 2% target level.

THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.

WASHINGTON (AP) — The Federal Reserve, tentatively pleased with progress it’s made in fighting inflation, has declared what amounts to a ceasefire: The Fed stopped raising interest rates in July, after imposing an aggressive 11 hikes since March 2022, to take time to see how the economy would respond.

So far, so good.

Inflation has kept slowing, and the economy has withstood the strain of the accumulated higher borrowing costs. Hope is growing that the central bank can achieve a rare “soft landing” by cooling the economy just enough to tame inflation without causing a recession. The financial markets, in fact, seem increasingly optimistic that the Fed can soon begin cutting rates, which would lighten borrowing costs for consumers and businesses.

On Thursday, the Labor Department is expected to report that underlying inflationary pressures eased further in December. Excluding volatile food and energy costs, “core” prices likely rose 0.2% from November, according to a survey of forecasters by the data firm FactSet, down from a 0.3% rise the previous month. And compared with 12 months earlier, core prices are thought to have risen 3.8% in December, down from a 4% year-over-year increase in November.

Economists pay particular attention to core prices because, by excluding costs that typically fluctuate sharply from month to month, they are a better guide to the likely path of inflation.

But the war against inflation isn’t won just yet.

Overall inflation is thought to have edged higher last month, putting it further above the Fed’s 2% target. According to the FactSet survey, economists think the broadest measure of consumer prices rose 0.2% from November to December and 3.2% from 12 months earlier. Both figures would mark a modest acceleration from the 0.1% October-November increase and the 3.1% year-over-year rise in November.

Those upticks wouldn’t likely cause concern. The index of overall inflation tends to bounce around from month to month.

Still, it helps explain why, despite steady economic growth, low unemployment and healthy hiring, polls show many Americans are dissatisfied with the economy. That disconnect, a likely issue in the 2024 elections, has puzzled economists and political analysts. One thing has become increasingly clear, though: The public is exasperated with prices that are still 17% higher than they were when the inflation surge began in early 2021.

Overall, the progress against inflation has been significant. A year ago, the 12-month rise in the consumer price index was 6.5% — way down from a four-decade high of 9.1% in June 2022 but still painfully high. Now, it’s just above 3%. And wage gains have outpaced inflation in recent months, meaning that Americans’ average after-inflation take-home pay is up.

There are solid reasons for optimism that inflationary pressure will continue to recede in the coming months.

The Federal Reserve Bank of New York reported this week, for example, that consumers now expect inflation to come in at just 3% over the next year, the lowest one-year forecast since January 2021. That’s important because consumer expectations are themselves considered a telltale sign of future inflation: When Americans fear that prices will keep accelerating, they will typically rush to buy things sooner rather than later. That surge of spending tends to fuel more inflation.

But that nasty cycle does not appear to be happening.

And when Fed officials discussed the inflation outlook at their most recent meeting last month, they noted some hopeful signs: An end to the supply chain backlogs that had caused parts shortages and inflation pressures and a drop in rent costs, which is beginning to spread through the economy.

Still, John Min, chief economist at the foreign exchange firm Monex USA, suggested that “the easy part’’ was slowing inflation from 9% to around 3%. Going “the last mile” to reach the Fed’s 2% target could prove the hardest stretch.

The December U.S. jobs report that was issued last week contained some cautionary news for the Fed: Average hourly wages rose 4.1% from a year earlier, up slightly from 4% in November. And 676,000 people left the workforce, reducing the proportion of adults who either have a job or are looking for one to 62.5%, the lowest level since February.

That is potentially concerning because when fewer people look for work, employers usually find it harder to fill jobs. As a result, they may feel compelled to sharply raise pay to attract job-seekers — and then pass on their higher labor costs to their customers through higher prices. That’s a cycle that can perpetuate inflation.

United States News

Associated Press

California man arrested for making threats against election official in Arizona after 2022 vote

SAN DIEGO (AP) — A San Diego man was arrested Thursday on suspicion of leaving threatening messages on the personal cellphone of an Arizona election worker he accused of rigging the 2022 election results, federal prosecutors said. The 52-year-old was charged with one count of communicating an interstate threat and will make an initial court […]

35 minutes ago

Associated Press

Two more candidates file papers to run for U.S. Senate in Pennsylvania

HARRISBURG, Pa. (AP) — Two more candidates filed paperwork Thursday to appear on Pennsylvania’s primary ballots for U.S. Senate as Democratic Sen. Bob Casey runs for a fourth term and Democrats try to maintain a majority in the narrowly divided chamber. Brandi Tomasetti, a Republican from Lancaster County, and William Parker, a Democrat from Allegheny […]

57 minutes ago

Associated Press

A work-from-home tip: Don’t buy stocks after eavesdropping on your spouse’s business calls

HOUSTON (AP) — A word to the wise: If you overhear your work-from-home spouse talking business, just forget anything you may learn from it. And most definitely do not trade stocks using what authorities will almost certainly view as inside information. Tyler Loudon, a 42-year-old Houston man, learned this lesson the hard way. He pleaded […]

2 hours ago

Associated Press

Biden ally meets Arab American leaders in Michigan and tries to lower tensions over Israel-Hamas war

DEARBORN, Mich. (AP) — As Thursday dawned in Dearborn, Michigan, Arab American leaders entered a local coffee shop and greeted Rep. Ro Khanna of California before pulling up chairs at a table. Over the next two hours, the leaders spoke about how they were personally affected by the war in Gaza and criticized President Joe […]

2 hours ago

Associated Press

Alaska man found guilty of first-degree murder in violent killing captured on stolen memory card

ANCHORAGE, Alaska (AP) — A man who recorded the violent death of an Alaska Native woman on his cellphone was found guilty of two counts of first-degree murder on Thursday in her death and that of another Alaska Native woman. Brian Steven Smith, a 52-year-old from South Africa, showed no reaction in court and stared […]

3 hours ago

Follow @ktar923...

Sponsored Content by Midwestern University

Midwestern University Clinics: transforming health care in the valley

Midwestern University, long a fixture of comprehensive health care education in the West Valley, is also a recognized leader in community health care.

Sponsored Articles

...

DISC Desert Institute for Spine Care

Sciatica pain is treatable but surgery may be required

Sciatica pain is one of the most common ailments a person can face, and if not taken seriously, it could become one of the most harmful.

...

Day & Night Air Conditioning, Heating and Plumbing

Day & Night is looking for the oldest AC in the Valley

Does your air conditioner make weird noises or a burning smell when it starts? If so, you may be due for an AC unit replacement.

...

Day & Night Air Conditioning, Heating and Plumbing

Valley residents should be mindful of plumbing ahead of holidays

With Halloween in the rear-view and more holidays coming up, Day & Night recommends that Valley residents prepare accordingly.

US inflation edges up, fueled by food and housing prices, but many other costs rise only mildly