December inflation data suggest price pressures remain contained but not fully defeated, reinforcing the Federal Reserve’s cautious stance. U.S. consumer prices rose 0.3% in December and 2.7% year over year, in line with expectations, according to the Bureau of Labor Statistics. Core prices, excluding food and energy, increased 0.2% on the month and 2.6% over the past year, signaling a slow but ongoing cooling in underlying inflation trends.
The report marks the first release of monthly inflation figures since September, after a government shutdown disrupted data collection in the fall. With the data pipeline restored, policymakers now have a clearer view of price dynamics as they assess whether additional interest rate cuts are appropriate following several reductions last year.
For Federal Reserve officials, the December inflation report is likely reassuring without being conclusive. Inflation remains above the central bank’s 2% target, tempering the case for aggressive easing, even as labor market conditions show early signs of softening. The data support the Fed’s recent messaging that it can remain patient and data-dependent rather than rushing to inject further stimulus.
New York Fed President John Williams reinforced that view on Monday, indicating little urgency to lower rates in the near term and solidifying expectations that the Fed will keep policy unchanged at its January 27–28 meeting. Williams has said he does not expect inflation to return fully to target levels until 2027.
