U.S. monthly consumer prices rose less than initially estimated in December, but underlying inflation remained a bit warm, a mixed picture that did not shift expectations on the timing of an anticipated interest rate cut from the Federal Reserve this year.
The annual revisions published by the Labor Department on Friday also showed the consumer price index increasing slightly more than previously reported in October and November.
The revised CPI data had been eagerly awaited by financial markets and economists after Federal Reserve Governor Christopher Waller last month flagged them as among the key data pieces he would be watching as policymakers try to gauge progress in their fight against inflation.
"The revisions were much ado about nothing," said Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin. "This is becoming a trend where a Fed official mentions a data release once and then everyone waits with bated breath only to find out that it’s a bunch of noise."
The consumer price index rose 0.2% in December instead of 0.3% as reported last month, the revisions of the CPI data published by the Labor Department's Bureau of Labor Statistics (BLS) showed. But data for November was revised up to show the CPI increasing 0.2% rather than 0.1% as previously estimated.
The CPI gained 0.1% in October. Prices were previously reported to have been unchanged in October.
The revisions emanated from the recalculation of seasonal adjustment factors, the model used by the government to strip out seasonal fluctuations from the data. This routine procedure, which the BLS undertakes every year, covered data from January 2019 through December 2023. The year-on-year data, which is not seasonally adjusted, was unrevised.
Excluding the volatile food and energy components, the CPI advanced by an unrevised 0.3% in December. The so-called core CPI also advanced by an unrevised 0.3% in November. The 3-month annualized core CPI inflation rate was unchanged at 3.3%
Aside from Waller's comments, the 2023 data was also of interest after revisions last year showed inflation a bit warmer in the second half of 2022 than previously thought.
U.S. Treasury yields initially fell, but later rose. The dollar was little changed against a basket of currencies. Stocks on Wall Street opened higher.
"Since some Fed officials were apparently worried about a repeat of last year, the lack of any meaningful change this year, at the margin at least, supports an earlier May rate cut," said Paul Ashworth, chief North America economist at Capital Economics in Toronto.
The CPI inflation readings for the fourth quarter will have an impact on the personal consumption expenditures (PCE) price indexes, the inflation measures tracked by the U.S. central bank for its 2% inflation target.
The core CPI increased 3.9% on a year-on-year basis in December. It is running ahead of the core PCE price index, which gained 0.2% on the month and rose 2.9% year-on-year in December.
Financial markets are anticipating that the Fed will start cutting interest rates sometime in the first half of the year. Since March 2022, the Fed has raised its policy rate by 525 basis points to the current 5.25% to 5.50% range.
