The gas prices mainly contributed to higher inflation in December. (action))
Annual inflation increased to 2.9% in December, slightly increasing the annual inflation rate by 2.7% previous monthAccording to the consumer price index (ICC) Released by the Bureau of Labor Statistics (BLS).
Inflation increased by 0.4% per month in December, slightly exceeding expectations. The central ICC, which excludes food and energy, increased by 0.2% in December, in lower estimates after four consecutive months of 0.3%. This brought the rate from one year to 3.2%.
The cost of energy increased by 2.6% and was the largest contributor to the monthly increase in December, representing almost 40% of the monthly increase in all the elements. Gas increased by 4.4% in the month. Food prices continued to increase, increasing 0.3% last month after an increase of 0.4% in November.
“The December CPI report brings a mixture of news, including a glow of optimism,” said the first American main economist Sam Williamson in a statement. “While the CPI title has increased and exceeded expectations, the monthly increase in the least volatile and more closely looked at and was lower than expectations.
“This downward surprise in the basic ICC is encouraging, but one month does not trend,” continued Williamson. “The federal reserve will probably have to see sustained progress before considering any drop in rate.”
The federal reserve reduced interest rates by a quarter of percentage in December, Reduced rate of 4.25% to 4.5%But the A few minutes from the Federal Open Market Committee Reunion has shown that there is growing concern about higher inflation and a clear division among Fed members on the advisability of continuing to compose rates. Some have expressed their support for the maintenance of the key rate of the central bank unchanged, and most of the officials said that the decision to reduce rates was a close call, according to the minutes. The next Fed meeting will take place on January 28 and 29.
“The figures for the December IPC indicate that inflation does not cool to the rhythm which satisfies the objective of the Fed,” said the CEO of Voxtur Analytics, Ryan Marshall. “Consequently, those who were optimistic that the Fed would further reduce interest rates in 2025 now realign forecasts to expect less rate reductions this year.”
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The costs of the shelters remain high
The costs of shelters increased by 0.3% per month, at the same pace as the previous month, which contributed to the annual inflation rate to 4.6%, against 4.7% last month, according to the chief economist of Realtor.com, Danielle Hale.
Despite the slight progress, the costs of the shelters remain above their pre-countryic range, which on average 3.3%, according to Hale. High costs are likely to block new rate drops, which affects the level of longer -term rate such as mortgage rates, which remain just below 7%.
“Currently, the market is not a good chance on a reduction before June,” said Hale in a statement. “The job market ended in 2024 with a blow, while hiring checked and the unemployment rate rose to 4.1% in December. With half the full job of the Fed's double mandate on a stronger basis than what seemed to be the case three to six months ago, the Fed is probably patient, especially if inflation continues to the target three to six months.”
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Housing prospects are trembling
High mortgage rates still block the housing market despite voluntary buyers, according to Hale. Owned accession remains a central objective for around 75% of Americans Questioned by Realtor.comBut affordability remains a major concern for many.
“Sales of existing houses have improved in recent months after the lower mortgage rates in the fall, but as rates have raised, our expectations for house sales have been reduced,” said Hale.
What is ahead of housing is cleaner in terms of mortgage rate, and house prices should continue to increase. A light point is that the new president Donald Trump Administration could stimulate greater economic growth and, therefore, higher income, which gives Americans more purchasing power. In addition, lower household tax rates should increase household disposable income, even if income does not increase, according to the Realtor.com housing forecasts.
“For 2025, Realtor.com housing forecasts provide for a modest drop in mortgage rates to fuel a modest increase in house sales,” said Hale. “Each decrease in the inflation rate will help bring this expectation of reality closer.”
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