According to Labor Department data released on Thursday, the overall cost of living increased by 3.4% in December over the previous year, a somewhat higher rate of increase than the 3.1% rate in November.
According to CPI data, monthly increases in food prices were 0.2%, equivalent to the rate of growth observed in November. Food costs have increased by 2.7% year over year, but this is still less than the 3.4% annual inflation rate.
In December, the price of auto insurance increased by 1.5% over the previous month, representing a 20.3% increase over the prior year.
Over half of the monthly increase in consumer prices was due to the cost of housing. The cost of food and electricity increased in December as well. Last month, the so-called “core” inflation rate—which does not include energy and food prices—was 3.9%.
Compared to food away from home (meals and snacks at restaurants, vending machines, and other venues), which is increasing 5.2% annually, groceries are still more affordable.
The CPI figures for Thursday also follow a very positive jobs report for December. According to the unemployment Labor Department data released this week, the economy added 216,000 jobs in December while the unemployment rate remained stable at 3.7%.
The data is lowering Wall Street’s expectations of a rate cut in March and may delay the Fed’s plans to lower interest rates. According to the CME FedWatch tool, financial markets anticipate the Fed a 69 percent likelihood of lowering rates at least once in March. They are practically likely to remain unchanged in January.
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