Prices Fell in December as Inflation Continues to Moderate

For the first time in nearly three years, inflation fell on a monthly basis. Consumer prices decreased by 0.1 percent in December, the Bureau of Labor Statistics reported in its Consumer Price Index. 

The last time prices were lower than the previous month was in May 2020.

The closely watched inflation gauge also showed that year-over-year prices continued to cool last month, slowing to 6.5 percent from 7.1 percent in November. But experts warn the U.S. is not out of the woods yet. 

The Fed has remained adamant that they will keep rates high to bring inflation back to normal levels. Experts said pricing trends bode well for overall inflation and for the broader economic picture. 

Economists had expected the latest CPI data to show softness, given that gas prices are down from their painful record high this summer.

Economists anticipate that the Fed will continue to slow the pace of its rate hikes in 2023. However, the end of the tightening cycle is still some ways off.

The latest report was the first inflation report of the new year. It was also the last before the Federal Reserve meets at the end of the month to determine how aggressively it will tackle rising costs.

The latest report from the US showed annual inflation, the pace at which prices rise, was at 6.5 percent in December. That was the smallest increase in more than a year, marking the sixth month in a row of the rate falling.

“It all adds up to a real break for consumers, real breathing room for families, and more proof that my economic plan is working,” said President Joe Biden on Thursday. “We have more work to do, but we’re on the right track.”

The US helped spark a global surge in the cost of living. 

Now that the price inflation shows signs of easing, experts are weighing in on whether it points the way for the rest of the world.

Analysts say that if America’s inflation problem is improving, that is good news for the rest of the world, especially if it means the central bank can ease up on its fight, allowing exchange rates to stabilize.