11 January: Federal Reserve Expected To Keep Powder Dry
Headline US inflation rose by more than expected to 3.4% in the year to December 2023, from 3.1% a month earlier, giving the Federal Reserve extra reason to keep borrowing costs at their present 22-year high when it reveals its next interest rate decision at the end of this month, writes Andrew Michael.
The US Bureau of Labor Statistics reported today that the Consumer Price Index (CPI) for All Urban Consumers rose by 0.3% last month, having fallen by 0.1 percentage points in November 2023.
Explaining today’s figures, the Bureau ascribed more than half of the increase in the monthly CPI figure to rising housing costs. Electricity and fuel prices also rose during December, more than offsetting a fall in the cost of natural gas.
According to the Bureau, core CPI, which leaves out volatile food and energy prices, rose 0.3% in December 2023, the same increase as a month earlier.
Over the year to December, the Bureau said that core CPI, which is regarded as a reliable gauge for longer-term inflation trends, rose by 3.9%, compared with 4% in the 12 months to November. Economists had expected a core CPI figure of 3.8% and a headline CPI figure of 3.2%.
The Federal Reserve, the US equivalent of the Bank of England, is mandated to maintain inflation at 2% over the medium to long-term. Last month, it left borrowing costs unchanged at a 22-year high, in a range between 5.25% and 5.5%.
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