Surprise Surge in CPI Poses Challenge to Fed’s Inflation Fight

The U.S. annual inflation rate came in hotter than economists expected, rising to 3.4 percent in December and fueled by the “usual suspects.” Despite the Consumer Price Index (CPI) slowing considerably after topping 9 percent in June 2022, sticky and stubborn inflation might be challenging to defeat in the economy. Last month, the Sticky-Price CPI— that is, price changes for goods that occur slowly and less often, like automobile costs, housing, and medical expenses—clocked in at 4.6 percent. This was down from 6.6 percent in January 2023, but remains at a more than three-decade high. Since 2021, cumulative inflation has spiked about 18 percent. Bureau of Labor Statistics (BLS) data show that there has been progress in the inflation fight, with many CPI components shifting to deflation and disinflation. However, other goods are proving to be stuck at an elevated level or have witnessed renewed growth. In addition, services inflation continues to be stubbornly high, trending at or above 5 percent for seven consecutive months....