Economy

Inflation rate ticks up in December despite high interest rates

Consumer prices on goods and services increased 3.4% in 2023, with the rising cost of shelter hitting Americans the most.

An advertising sign for building land stands in front of a new home construction site in Northbrook, Ill.
Nam Y. Huh/AP
SMS

The consumer price index, the top measure for inflation in the U.S., increased in December to 3.4% in the 12-month period ending in December, which was up from 3.1% in November. The Bureau of Labor Statistics released the updated consumer price index on Thursday.

The U.S. inflation rate remained relatively steady in the last half of 2023, staying between 3% and 3.7%. The U.S. inflation rate in December 2022 was 6.5%.

The consumer price index weighs the costs of goods based on their importance. Items like food, shelter and energy tend to be weighted more heavily.

The once sky-high inflation on food at the grocery store has cooled to near-normal levels. Food meant to be consumed at home has gone up 1.3% in the last year, the Bureau of Labor Statistics said. 

Some common grocery staples, such as milk, fresh fruits and vegetables, coffee, and butter, were cheaper this December compared to last December.

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The biggest driver keeping inflation elevated is shelter, which was up 6.2% last month compared to December 2022. 

The new inflation data comes about three weeks before the Federal Reserve meets to consider changing federal interest rates. In December, the Federal Reserve held interest rates at their highest levels since early 2001. 

Federal Reserve Chair Jerome Powell has made it the Fed's goal to get inflation to an annualized rate of 2%. Powell has suggested the Federal Reserve could lower interest rates early in 2024 as inflation stabilizes. But it's unclear whether the latest consumer price index would cause hesitation by Powell and the Fed.

The new data also suggests that wage increases more than kept up with inflation in 2023. Average weekly earnings outpaced inflation by 0.5% in 2023. Inflation outpaced weekly earnings in 2022 by 2.7%.