U.S. Inflation Slows for Sixth Straight Month

Consumer-price index rose 6.5% last month from a year earlier.

U.S. inflation eased in December for the sixth straight month following a mid-2022 peak as the Federal Reserve aggressively raised interest rates and the economy showed signs of cooling.

The consumer-price index, a measurement of what consumers pay for goods and services, rose 6.5% last month from a year earlier, down from 7.1% in November and well below a 9.1% peak in June.

Core CPI, which excludes volatile energy and food prices, climbed 5.7% in December from a year earlier, easing from a 6% gain in November. Many economists see increases in core CPI as a better signal of future inflation than the overall CPI. Core prices increased at a 3.1% annualized rate in the three months ended in December, the slowest pace in more than a year and down from 7.9% in June.

The figures added to signs that inflation is turning a corner following last year’s surge. They also likely keep the Fed on track to reduce the size of interest-rate increases to a quarter-percentage-point at their meeting that concludes on Feb. 1, down from a half-percentage point increase in December.

U.S. stocks climbed Thursday and investors bought U.S. Treasurys, lifting bond prices and weighing on yields. The S&P 500 added 0.3%, while the Dow Jones Industrial Average gained 0.6%, or 217 points. The technology-heavy Nasdaq Composite also rose 0.6%.

Core services and goods prices, change from a year earlierSource: Labor DepartmentNote: Core CPI refers to consumer-price index less food and energy. Core services refers to services less energy services. Core​goods excludes food and energy items.

Easing inflation follows several signs that U.S. economic activity cooled in late 2022. U.S. imports and exports fell in November from October, while retail sales, manufacturing output and home sales all declined. Job and wage growth slowed in December, though the labor market remained tight with historically low claims for unemployment insurance at the start of the year.

Goods prices, a key driver of inflation over the past year and a half, fell for the third straight month in December as prices fell for products such as autos, computers and sporting goods.

Improving supply chains and reduced demand have relieved price pressures on goods, but services prices continued to climb in part because of wage gains in a tight labor market. 

Some economists worry that still-high wage growth could keep consumers flush with cash and companies eager to raise prices to compensate, holding inflation above the Fed’s 2% target.

“Taming services inflation will be the Fed’s biggest challenge this year,” said Ryan Sweet, chief U.S. economist at Oxford Economics.