Key Inflation Indicator Rose in December

An inflation gauge closely watched by the Federal Reserve rose slightly last month, the latest sign that some consumer prices remain stubbornly elevated, even as inflation is cooling in fits and starts. Friday's report from the Commerce Department showed that consumer prices rose 2.6% in December from a year earlier, up from a 2.4% annual pace in November and the third straight increase, the AP reports. Excluding the volatile food and energy categories, prices increased 2.8% compared with a year ago, the same as in November and October.

The figures arrive just two days after Federal Reserve officials, led by Chair Jerome Powell, decided to pause their interest rate cuts in part because inflation has largely been stuck at about 2.5%, above their 2% target, for the past six months.

• There were some positive signs in Wednesday's report, however. When measured in shorter time frames, inflation is slowing: In December, core prices ticked up 0.2% from the previous month, a pace that is nearly consistent with the Fed's annual target. Economists—and Fed officials—pay close attention to core prices because they provide a better read on where inflation is headed. Overall inflation climbed 0.3% in December from the previous month, driven higher by a jump in gas prices.

• The Commerce Department's report also showed consumer spending rose a healthy 0.7% in December from the previous month, fueled in part by steady wage gains.
• Underlying trends point to lower inflation ahead. Apartment rental prices and other housing costs are slowly moderating. And a sluggish labor market has meant wage growth has slipped, which means companies are under less pressure to raise prices to offset higher labor cost.
• "We seem to be set up for further progress," Powell said Wednesday. "But being 'seem to set up for' it is one thing, having it is another. So we're going to want to see further progress on inflation."
• In a Truth Social post after the Fed's decision, President Trump said inflation would never have been a problem if the central bank had "spent less time on "DEI, gender ideology, 'green' energy, and fake climate change." He vowed to cut inflation himself by boosting energy production and cutting regulation, among other things.

(More inflation stories.)