December’s inflation data showed encouraging signs of moderation, with core CPI (excluding food and energy) increasing 0.2% monthly and 3.2% annually, marking the first deceleration since July. While headline inflation met expectations at 2.9% annually, the shelter index showed improvement, rising 4.6% annually – its smallest increase since January 2022. However, certain categories remained problematic, with used car prices rising 1.2%, energy costs jumping 2.6% monthly, and egg prices surging 3.2%. Markets welcomed the data, with Treasury yields falling below 4.7%, though concerns linger about potential inflationary pressures from Trump’s proposed policies, including tariffs and tax cuts, as his inauguration approaches.
