Inflation accelerated as expected in December

• Inflation accelerated for the third straight month.
• The consumer price index rose 2.9% year-over-year in December, matching the consensus expectation.
• The Federal Reserve is expected not to cut interest rates later this month.

Inflation sped up in December as expected, marking the third consecutive month of acceleration.

The consumer price index, an inflation measure, increased 2.9% over the year this past December. That matches the forecast increase and is above November's year-over-year increase of 2.7%.

While the 2.9% is the highest rate since July, it falls short of the roughly 3.1% in January 2024. Inflation was around or above 3% for the first half of the year; it slowed from the year's peak of 3.5% in March to 2.4% in September.

The Federal Open Market Committee could consider the new data in its interest rate decision at the end of the month. After three consecutive cuts, there likely won't be another interest rate cut just yet.

Traders have been expecting the Federal Open Market Committee to hold the Fed's target rate steady at 2025's first scheduled meeting. CME FedWatch, which indicates what traders expect to happen to rates based on market activity, showed before the CPI release a 97% chance the Fed's target rate would be unchanged.

Fed chair Jerome Powell said at a press conference on December 18 that "the Committee will assess incoming data, the evolving outlook, and the balance of risks" when figuring out any additional changes to its target rate.

"We know that reducing policy restraint too fast or too much could hinder progress on inflation," Powell said after the most recent interest-rate decision. "At the same time, reducing policy restraint too slowly or too little could unduly weaken economic activity and employment."

The recent jobs report, published last Friday, showed job growth exceeded the forecast in December, while unemployment fell from 4.2% in November to 4.1% in December. Cory Stahle, an economist at the Indeed Hiring Lab, said the labor market report "validates the stance that we've seen from the Fed recently."

This is a developing story. Please check back for updates.