NATIONAL NEWS

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

Jan 10, 2024, 3:35 PM | Updated: Jan 11, 2024, 7:25 am

A television screen shows the rate decision of the Federal Reserve as traders work on the floor of ...

A television screen shows the rate decision of the Federal Reserve as traders work on the floor of the New York Stock Exchange. (AP Photo/Richard Drew, File)

(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.

 

National News

Associated Press

Philadelphia police officer shot by fleeing suspect is in critical condition

A Philadelphia police officer was shot in the neck and was in critical condition Saturday night, officials said. The 31-year-old officer was in critical condition and undergoing surgery at Temple University Hospital, Police Commissioner Kevin Bethel said during a news conference outside the hospital. The officer, a veteran of more than six years on the […]

1 hour ago

Associated Press

A fourth victim has died a day after a shooting at an Arkansas grocery store, police say

LITTLE ROCK, Ark. (AP) — Police say a fourth victim has died a day after a shooting at an Arkansas grocery store. The person died Saturday evening, Arkansas state police said in a statement. A total of 14 people were wounded in Friday’s shooting, according to police: “11 civilians, two law enforcement officers and the […]

2 hours ago

Associated Press

2 people were taken to a hospital after lightning struck a tree near a PGA Tour event in Connecticut

CROMWELL, Conn. (AP) — Two people were taken to the hospital Saturday after lightning struck a tree near a home along a golf course that is hosting the PGA Tour’s Travelers Championship. The home is just north of the fifth green at TPC River Highlands, which is hosting the tournament one week after the U.S. […]

4 hours ago

Associated Press

Rains, cooler weather help firefighters gain ground on large wildfires in southern New Mexico

RUIDOSO, N.M. (AP) — Recent rains and cooler weather are helping more than 1,000 firefighters gain ground on two wildfires in southern New Mexico on Saturday that have killed two people, destroyed hundreds of homes and forced thousands to flee. Fire crews took advantage of temperatures in the 70s, scattered showers and light winds to […]

10 hours ago

Associated Press

One dead, seven injured after shooting at Kentucky nightclub

LOUISVILLE, Ky. (AP) — One person is dead and seven others were injured after a shooting at a Kentucky nightclub early Saturday morning, authorities say. Louisville Metro Police Department officials said they responded to a call of several people shot at the H20 nightclub in Louisville just before 1 a.m. One man, 40-year-old Joseph D. […]

10 hours ago

Associated Press

Man trying to drown 2 children on Connecticut beach is stopped by officers, police say

WEST HAVEN, Conn. (AP) — A man trying to drown two small children at a Connecticut beach early Saturday morning was thwarted by police officers, according to authorities. An officer spotted an SUV parked on a beach in West Haven at about 2:30 a.m. and heard “significant screaming” from the water as he approached. As […]

11 hours ago

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