US consumer inflation rises in December but underlying pressures ease

WASHINGTON, JAN 16 (AFP/APP/DNA):US consumer inflation rose for a third straight month in December as energy prices jumped but a widely watched measure eased slightly, raising hopes that underlying inflation may be moderating.

The consumer price index (CPI) accelerated to 2.9 percent last month from a year ago, up from 2.7 percent in November, the Labor Department said in a statement on Wednesday.

This was in line with the median forecast of economists surveyed by Dow Jones Newswires and The Wall Street Journal.

Stocks jumped on the news, with all three major indices on Wall Street closing sharply higher.

On a monthly basis, inflation rose by 0.4 percent, slightly faster than expected.

One of the biggest drivers of inflation in December was the energy index, which jumped by 2.6 percent, accounting for “over” 40 percent of the monthly increase, according to the Labor Department.

In some good news for the Federal Reserve, annual inflation excluding volatile food and energy costs came in at a lower-than-expected 3.2 percent, marking a slight decline from the month earlier.

– Focus on the core –

The so-called “core” measure of inflation increased by 0.2 percent, also slightly below expectations.

“The focus is really on the core reading, and the core reading did come in better than the consensus expectations,” Nationwide chief economist Kathy Bostjancic told AFP.

The US central bank has cut rates by a full percentage point since September as it looks to bolster the labor market.

The recent uptick in inflation adds to expectations that it will remain firmly on pause at its next rate decision later this month.

However, higher prices could complicate President-elect Donald Trump’s economic plans as he prepares to return to office on Monday.

Trump has floated several policies, from tariffs to deportation, that many economists say could have an inflationary impact.

The Republican and his supporters have disputed this characterization, claiming that many of his proposals aimed at deregulation and boosting energy production should help keep prices in check.