The December inflation report released Thursday spooked traders as the numbers came in a bit ahead of expectations. After declining sharply in the morning, stocks drew upon their resilience and finished flat in the session. An economist, however, said he sees the number as a confirmation that the Federal Reserve has failed in its inflation fight.
What Happened: “Anyone who thinks the #Fed will succeed in returning #inflation to 2% doesn’t understand inflation, including [Jerome] Powell or other FOMC members” said economist and gold bull Peter Schiff in a post on X, formerly Twitter.
The headline consumer price inflation as well as core inflation, which excludes the volatile food and energy, rose at a monthly rate of 0.3% each. Economists, on average, modeled 0.2% n and 0.3% rates, respectively. The annual CPI and core CPI inflation came in at 3.4% and 3.9%, respectively, compared to the 3.2% and 3.8% expected by economists.
Schiff said, ”Today’s hotter than expected Dec. #CPI doesn’t mean that the Fed has to fight harder to win the inflation war, but that it’s already lost!”
See Also: Best Inflation Stocks
Why It’s Important: Fears regarding inflationary pressure rising unabated drove the central bank to raise rates from near zero levels in early 2022 to a 22-year high of 5.25%-5.50% by 2023. As inflation pulled back from its summer 2022 highs, the Fed relented and began to pause.
Powell as well as other Fed speakers have continued to assert future monetary policy trajectory will hinge on inflation’s trajectory.
Commenting on the December data, Comerica’s Chief Economist Bill Adams said the pickup of inflation in largely reflects uneven base comparisons with late 2022 when the price of gasoline dropped sharply.
“By comparison, gasoline prices fell a little less than usual between November 2023 and December 2023, which showed up as a seasonally-adjusted monthly increase in the CPI Gasoline component,” he said.
The annual rate of the shelter component of the CPI, though rising faster than normal, slowed from 6.5% in November to 6.2% on the year in December, Adams noted. This component is important as it typically accounts for two-fifths of the CPI basket, excluding food and energy.
”But the big picture is that the economic dislocations caused by the pandemic are…
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