⬤ December's inflation data showed price pressures continuing to ease, though not as dramatically as some hoped. Core CPI (the reading that strips out food and energy) climbed 0.2% month-over-month and 2.6% year-over-year—both figures landing 0.1 percentage point below what markets anticipated. Headline CPI rose 0.3% for the month and 2.7% annually, matching expectations and confirming we're seeing a gradual cooldown rather than any sudden collapse in inflation.
⬤ But here's where it gets interesting: shelter costs are still the stubborn holdout. Housing expenses jumped 0.4% in December and are up 3.2% from last year, accounting for over a third of the entire CPI basket. That's the single biggest driver keeping inflation elevated. Food prices rose 0.7% for the month, though there was some relief at the grocery store—egg prices actually dropped 8.2% after their earlier surge. On the flip side, recreation prices posted their largest monthly spike on record at 1.2%, showing inflation isn't gone—it's just shifting around.
⬤ What does this mean for Fed policy? Probably not much in the short term. Inflation's moving in the right direction, but not fast enough to trigger rate cuts. At the same time, there's nothing here screaming "emergency" that would push the Fed to tighten further. Markets are betting rates stay steady through at least June, which lines up with the idea that inflation's drifting lower at a comfortable pace—just not racing toward that 2% goal.
⬤ For everyday people, though, the picture's mixed. Sure, inflation's cooling, but housing costs are still crushing budgets for renters and homeowners alike. Real wages stayed flat in December and are only up 1.1% year-over-year. And here's a telling stat: workers' share of GDP hit its lowest point since 1947 last quarter. So while the inflation fire is dying down, most people aren't feeling the relief yet. Bottom line? We're seeing gradual normalization, not some big breakthrough that'll suddenly make life more affordable.
