Inflation Moderates To 3.5 Percent In December Showing Continued Progress
Data released in mid-January indicated that U.S. consumer inflation slowed to 3.5 percent year-over-year in December 2024, continuing a downward trend from peaks observed in 2022 and early 2023. Core inflation, which excludes volatile food and energy prices, rose 3.0 percent annually, further demonstrating a moderation in underlying price pressures.
The easing inflation figures reflect improvements in supply chain efficiency and more stable commodity prices. Energy costs were relatively steady in December, helping to keep headline inflation in check. Food prices also moderated after earlier spikes.
While inflation remains above the Federal Reserve’s target of 2 percent, the ongoing decline suggests that monetary policy efforts are effectively slowing price growth without significantly impeding economic expansion.
Wage growth, an important driver of inflation, showed signs of moderation, reducing concerns over wage-price spirals that can entrench inflationary expectations.
Economists emphasize the importance of continuing to monitor inflation data, especially given potential risks from geopolitical developments and commodity market volatility. The current moderation provides some flexibility for policymakers but also underscores the need for vigilance to sustain price stability.
The inflation trend supports the Federal Reserve’s cautious stance on interest rates, balancing the objectives of controlling inflation and supporting the labor market.
As 2025 progresses, inflation dynamics will remain a key focus for markets and policymakers alike, with the goal of achieving stable prices that foster long-term economic growth.
