Core U.S. consumer prices rose less than predicted in December, reinforcing hopes that inflation is tempering as the Federal Reserve contemplates its next move on interest rates.
Excluding volatile food and energy prices, the consumer price index showed a seasonally adjusted 0.2% gain on a monthly basis and 2.6% annually, the Bureau of Labor Statistics reported Tuesday. Both were 0.1 percentage point below expectations. Though they look at both measures, Fed officials consider core inflation a better long-run gauge of where inflation is heading.
On a headline basis, the CPI posted an increase of 0.3% for the month, putting the all-items annual rate at 2.7%. Both were exactly in line with the Dow Jones consensus estimate.
The Fed targets inflation at 2% annually, so the report provides some evidence that the pace of prices increases is moving back to target but remains elevated.
Stock market futures rose following the report while Treasury yields were lower.
Shelter, a key element of stickiness, increased 0.4%, which was the biggest item for the monthly increase, according to the BLS. The category accounts for more than one-third of the CPI weighting and was up 3.2% on an annual basis.
Other parts of the report also showed inflation persisting.
Food prices jumped 0.7% for the month, accompanied by increases in recreation, air fares and medical care. Some tariff-sensitive categories also posted increases, including apparel. However, household furnishings saw a decrease as President Donald Trump backed off on threatened tariff increases for imports in that sector.
The 1.2% increase for recreation was the largest monthly gain ever for the index in data going back to 1993, the BLS said.
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