Inflation in the United States: in December it fell again and reached 6.5%

Inflation in the US fell again in December and records an index of 6.5% compared to the previous yearthe government reported on Thursday.

This strengthens hopes that it will continue to decline throughout 2023, and possibly require less drastic measures by the Federal Reserve to control it.

December’s reduction is the sixth consecutive year-over-year decline, against 7.1% in November. In monthly terms, prices fell 0.1% from November to December, the first drop since May 2020.

The decline in rates adds to growing signs that the worst inflation run in four decades is gradually easing.

Even so, the Central Bank (FED, for its acronym in English) does not expect inflation to slow enough get closer to its 2% target through 2024.

The bank is expected to raise its key rate by at least a quarter point at its next meeting later this month.

December detail

Excluding volatile food and energy costs, so-called core prices increased by 5.7% in December year-over-year, slower than in 6% YoY increase recorded in November.

From November to December, core prices rose by just 0.3%, the third consecutive monthly slowdown, following a 0.2% increase in November.

Although inflation gradually slows down, it remains at harsh reality for many Americansespecially considering that essential commodities like food, energy and rent have skyrocketed over the past 18 months.

Food prices rose 0.2% from November to December, the smallest increase in nearly two years. Even so, those prices are up 11.8% from a year ago.

Much of the decline in headline inflation is due to the decline in petrol prices. The national average price of a gallon of gasoline fell from $5 in June to $3.27 on Wednesday.

Also contributing to the slowdown are the prices of used cars, which fell for the sixth consecutive month in December. New car prices have also fallen. He also lowered the price of airline tickets and personal care, such as haircuts.

Improving supply chains

Supply chain issues, which previously inflated the cost of products, have largely been resolved. Consumers have also shifted much of their spending from physical goods to services, such as travel and entertainment. As a result, the cost of goods, including used cars, furniture and clothing, has declined for two consecutive months.

Last week’s December jobs report strengthened the possibility of avoiding a recession. Even after the Federal Reserve’s seven rate hikes last year and with inflation still high, businessmen it created 223,000 jobs in Decemberand the unemployment rate fell to 3.5%, reaching its lowest level in 53 years.

Source: AP