Consumer prices went up 3.4% in December, according to a report released Thursday by the Bureau of Labor Statistics. The Federal Reserve’s plan to lower interest rates has been stopped in its tracks.
If interest rates are lowered, it would be easier to pay back loans like mortgages and credit cards. However, this could cause inflation to rise. Economists didn’t think prices would go up as much as they did last month. This made them change their minds about lowering interest rates.
The Federal Reserve recently said that they want inflation to reach 2% before they can deal with the problem of interest rates. Most of the price rises last month were in bigger investments, like mortgages, housing costs, and energy costs. But some food prices are even higher than they would be if prices went up by inflation. The price of beef went up by 9% in December alone, and the price of crackers went up by 8% in the same month.
As of December, core inflation rose to 3.9%, which is a little less than the previous month. Core inflation measures inflation without taking into account the prices of food and energy.
What the Federal Reserve calls a “soft landing” is what they want to happen. This would mean that prices rise normally while the economy grows. As the Federal Reserve works to get the economy under control, the current state of the economy could make these plans less likely to come true.
It’s not as high as it was last year (9%), but it’s still not where the Federal Reserve wants it to be (2%). The Fed is scared that the economy will grow even more, which could cause prices and demand to rise again.
Jerome Powell, the head of the Federal Reserve, talked about the changes. Powell said, “Inflation has slowed down from its highs, and this has happened without a big rise in unemployment.” “That is great news.”
Some people who follow the market think that the Fed will lower interest rates at their meeting in March. Others say that those people might be “in for a disappointment” because the way the economy is going, that might not happen.
