An inflation gauge closely watched by the Federal Reserve rose slightly last month, according to the Associated Press. It’s the latest sign that some consumer prices remain stubbornly elevated, even as inflation is cooling in fits and starts.
Friday’s report from the Commerce Department showed that consumer prices rose 2.6% in December from a year earlier, up from a 2.4% annual pace in November and the third straight increase. Excluding the volatile food and energy categories, so-called “core” prices increased 2.8% compared with a year ago, the same as in November and October.
Overall inflation climbed 0.3% in December from the previous month, driven higher by a jump in gas prices. Monthly increases at that level, if they continued, would exceed the Fed’s target. In the past three months, core prices have risen at an annual rate of just 2.2%, down from 2.6% in November.
The Commerce Department’s report also showed consumer spending rose a healthy 0.7% in December from the previous month, fueled in part by steady wage gains and higher stock prices and home values. Incomes rose 0.4%, the government said. With spending outpacing incomes, the savings rate fell to 3.8% from 4.1%.
Underlying trends point to lower inflation ahead. Apartment rental prices and other housing costs are slowly moderating, and a sluggish labor market has meant wage growth has slipped, so companies are under less pressure to raise prices to offset higher labor costs.
