A Closely Watched Measure of Inflation Slowed in December

The Federal Reserve’s preferred inflation index rose 5% in the year to December, a notable decline from November and the continuation of a six-month downtrend.

After excluding food and fuel, the price index rose 4.4% from a year earlier, in line with what economists in a Bloomberg survey had predicted and down from 4. .7% in November.

The overall picture is that inflation is moderate – providing some long-awaited relief to consumers – but still growing unusually fast at a rate more than double the 2 percent the Fed Aim for a time average.

Central banks are raising interest rates to make it more expensive to borrow money to make a large investment or finance a business expansion, in hopes of reducing demand enough to drive prices up lower increase. Policymakers raised their key policy rate from near zero to more than 4.25% last year, and they are tipped to raise a quarter point more in their decision on February 1. .

The Fed is deciding when to stop raising rates and keep rates high for how long – decisions it says will be influenced by upcoming data on inflation and the broader economy. That focuses attention on metrics like the one released on Friday.

John C. Williams, president of the Federal Reserve Bank of New York, said last week: “It will take time for supply and demand to return to proper alignment and balance, so we have to move on. act.

The Fed is also monitoring measures of economic activity, including consumer spending and the labor market. While layoffs at major tech companies have been in the spotlight in recent weeks, jobless claims have remained very low and the unemployment rate is at its lowest level in half a century. century.

That is expected to change this year. As the Fed’s rate hikes take full effect, economists at the central bank and Wall Street expect the US economy to slow and unemployment higher. Officials are hoping that they can resolve the recession without pushing the economy into a full-blown recession, but there are no guarantees.


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