Inflation eases to 6.5%, beating expectations again

The Consumer Price Index climbed 6.5 percent in the year through December, down from 7.1 percent in November and the slowest rate since October 2021, The New York Times reported Jan. 12.

Nine notes:

1. The nearly 12 percent attenuation and the continued healing of supply chains means that inflation is starting to moderate meaningfully, the report said.

2. Core inflation, which removes food and fuel prices from the calculation, climbed 5.7 percent over the year in December, lower than the expected 6 percent.

3. Energy prices are continuing to come down.

4. Climbing rental rates may continue to push inflation higher for a while, but that trend is expected to reverse by the summer, the report said. There are signs it's already happening, with some private data suggesting rents for newly leased apartments are starting to rise much more slowly.

5. On the other side of the coin, unusually rapid increases in the price for services like hospitality, sporting event tickets and healthcare could throw a wrench in the Fed's anti-inflation plans, the report said.

6. The stock market had a mixed initial reaction to the news, with S&P 500 futures wavering between small gains and losses.

7. Investors are predicting the Fed continues to slow its interest rate hikes.

8. Consumer demand may be keeping inflation from cooling in some parts of the economy.

9. In a welcome sight for investors, the yield on two-year U.S. government bonds, which is sensitive to Fed policy changes, fell 0.1 percentage points to 4.13 percent from a peak of 4.72 percent in November, the report said.

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