In this morning’s data, the headline Consumer Price Index (CPI) increased 0.4% in December, as expected and is one tenth higher than the previous month’s increase. On an annualized basis it grew 2.9%, above the previous month’s figure. The core rate, which excludes prices for food and energy, increased 0.2% in December, slightly less than expected and one tenth less than last month’s increase. It grew 3.2% on an annual basis, slightly less than the previous month.
Looking at the individual categories, monthly prices for Gasoline, up 4.4%, and Fuel Oil, also up 4.4%, were relatively strong while monthly prices for Apparel, up just 0.1%, were relatively weak. Prices for Shelter were up 0.3%, the same as last month.
Overall, monthly increases for the headline figures were as expected, while the core rate was slightly less than expected. On an annualized basis, the headline measure was higher than the previous month and the core rate ticked just slightly lower, but is still above the Fed’s target, likely leading to a cautious stance on policy. The dynamic of higher prices for energy, including gasoline and fuel oil, impacted headline figures more than the core rate.
Meanwhile also this morning, the quarterly earnings season is starting with a number of financial firms, including JP Morgan and Blackrock, releasing initially positive results for the quarter. With sticky inflation and a potentially cautious Fed, earnings results will be key for the markets in the coming weeks.
In all, the 10-year US treasury yield ticks lower following the report and equity futures are higher as we head into the market open.
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