Inflation chills out
Lowest rise in 3 years as Fed mulls rates
The Federal Reserve’s favorite inflation gauge rose just 0.2% from November to December — the lowest level in nearly three years.
The latest data on the personal consumption expenditures price index — also known as “core inflation” which strips away food and energy costs — is likely to whet the appetites of Wall Street investors who are eagerly anticipating interest-rate cuts by the Fed this year.
“The big picture is that the Fed doesn’t need to worry that stronger economic growth will stoke inflation because it hasn’t,” Sonu Varghese, global macro strategist at Carson Wealth, told CNBC.
“We are expecting rate cuts in 2024.”
Compared with a year earlier, “core” prices climbed 2.9% in December — the smallest such increase since March 2021.
Economists consider core prices a better gauge of inflation’s likely path.
The cooling down of inflation comes amid more good news for the US economy.
The nation’s economy grew at an unexpectedly brisk 3.3% annual pace from October through December as Americans showed a continued willingness to spend freely despite high interest rates and price levels.
Thursday’s report from the Commerce Department indicated the gross domestic product — the economy’s total output of goods and services — decelerated from its sizzling 4.9% growth rate the previous quarter.
Solid consumer spending propelled the growth, capping a year that began with widespread expectations of a recession.
Instead, the economy grew 2.5% in 2023, up from 1.9% in 2022.
Despite the cooling down of inflation, Fed officials, including Chairman Jerome Powell, have been cautious about declaring a victory.
While investors are eager for interest rate cuts, the central bankers are likely to keep rates the same when they meet next week.
On Wall Street, stocks were mixed Friday though the major indexes recorded a third-straight winning week.
The S&P 500 and the Nasdaq rose by 1.1% and 0.9% for the week , respectively, while the Dow gained 0.6%.