Bottom Line:
The headline Consumer Price Index (CPI) increased as expected while the core CPI increased less than expected during the last month of 2024. Although the headline CPI increased to 2.9% on a year-earlier basis in December compared to 2.7% in November, the core CPI declined from 3.3% in November to 3.2% in December, as the month-over-month core CPI rate came in lower than expected. Markets reacted positively this morning for a good reason: the Federal Reserve is ok with watching the headline CPI go up temporarily if that increase does not spill over into the core CPI, and this is what happened in December.
Summary:
The headline Consumer Price Index (CPI) increased by 0.4% during the last month of 2024. On a year-earlier basis, the headline CPI increased from 2.7% to 2.9%, according to the Bureau of Labor Statistics. The core CPI—CPI excluding volatile components like energy and food prices—increased by 0.2%, month-over-month. The core CPI declined to 3.2% on a year-earlier basis in December compared to a 3.3% rate for the twelve months ending in November of last year and expectations for an increase of 3.3%.
Observations:
The increase in the headline CPI was the highest month-over-month reading since March of 2024. According to the report, energy prices, which were up 2.6% during December of 2024, represented more than 40% of the increase in the monthly index. Gasoline prices were up 4.4% during the month. The index for food also increased considerably, by 0.3%, during the month.
The increase in the core CPI was due to an increase in the index for shelter (+ 0.3%), used car prices (+1.2%), new vehicle prices (+0.5%), transportation services (+0.5%), due to airline fares, and medical care services (+0.2%).
Consumer Price Index Table

Consumer Price Index Chart

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