Inflation increases in December, signals a tough fight against higher prices remains: CEI analysis

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The Consumer Price Index report for the last month of 2024 shows a higher-than-usual inflation increase of 0.4 percent, indicating the Fed’s decision to cut rates came too soon. CEI senior economist Ryan Young explains why the Fed must stick to the inflation fight and not cave into political pressures.
“The Fed’s rate-cut strategy has backfired. They started too soon, before inflation stabilized at its 2 percent target. While an interest rate increase is not in the cards, it is more likely the Fed will hold rates steady at their next meeting on January 28-29.
“The CPI is up 2.9 percent over the last year, after a bigger-than-usual 0.4 percent jump during December. More concerning is the Core CPI, which is now at a 3.2 percent annual rate. This excludes food and energy prices, which bounce around for supply-and-demand reasons that have little to do with the monetary inflation the Fed is concerned with.
“Falling energy prices over the last year are masking some of that monetary inflation, hiding the seriousness of the problem.
“It could be a bumpy ride this year, though fortunately inflation will not go back to COVID-era levels without another COVID-level spending bonanza. Tariff hikes, regulation-induced housing shortages, and general policy uncertainty will keep consumer prices higher than they otherwise would be. If the Fed caves into Trump administration pressure to lower interest rates, inflation will stick around for even longer.”