Inflation in December was even lower than first reported, the government says

People
shop
in
a
supermarket
in
the
Manhattan
borough
of
New
York
city
on
January
27,
2024.

Charly
Triballeau
|
AFP
|
Getty
Images

The
prices
consumers
pay
in
the
marketplace
rose
at
an
even
slower
pace
than
originally
reported,
according
to
closely
watched
revisions
the
government
released
Friday.

Updates
to
the
consumer
price
index
showed
that
the
broad
basket
of
goods
and
services
measured
increased
0.2%
on
the
month,
less
than
the
originally
reported
0.3%,
the
Labor
Department’s
Bureau
of
Labor
Statistics
said.

While
the
change
is
only
modest,
it
helped
confirm
that
inflation
was
moderating
as
2023
ended,
giving
more
leeway
to
the
Federal
Reserve
to
start
cutting
interest
rates
later
this
year.

The
revisions
are
done
as
a
matter
of
course
for
the
BLS,
but
garnered
extra
attention
this
year
after
the
market
reacted
sharply
to
last
year’s
changes.
Indications
that
inflation
in
2022
rose
more
than
anticipated
drove
Treasury
yields
higher
and
sparked
worry
from
investors
that
the
Fed
might
keep
monetary
policy
more
restrictive.

Fed
Governor
Christopher
Waller,
in
particular,
had
called
attention
to
the
2022
revisions,
sparking
market
attention
for
the
latest
round.

Excluding
food
and
energy,
the
so-called
core
CPI
increased
0.3%
for
the
month,
the
same
as
originally
reported.
Fed
policymakers
tend
to
focus
more
on
core
measures
as
they
provide
a
better
indication
of
long-run
movements
in
inflation.

Also,
the
headline
November
reading
was
revised
higher,
up
0.2%
versus
the
initial
0.1%
estimate.

In
aggregate,
the
revisions
indicate
that
headline
CPI
accelerated
at
a
2.7%
annualized
rate
in
the
fourth
quarter,
down
0.1
percentage
point
from
the
initially
stated
figures,
according
to
Ian
Shepherdson,
chief
economist
at
Pantheon
Macroeconomics.
Further
out,
the
second-half
revisions
put
CPI
higher
—
by
0.003
percentage
point,
according
to
Goldman
Sachs
calculations.

The
revisions
amounted
to
“a
damp
squib,”
said
Paul
Ashworth,
chief
North
America
economist
at
Capital
Economics,
though
they
could
exert
some
influence
on
the
Fed.

“Since
some
Fed
officials
were
apparently
worried
about
a
repeat
of
last
year
—
when
the
revision
pushed
up
the
monthly
changes
in
core
prices
in
the
final
few
months
of
last
year
—
the
lack
of
any
meaningful
change
this
year,
at
the
margin
at
least,
supports
an
earlier
May
rate
cut,”
Ashworth
added.

The
Fed
prioritizes
the
personal
consumption
expenditures
price
index
as
its
main
inflation
gauge.
CPI
readings
feed
into
the
Commerce
Department’s
PCE
calculation.
The
difference
between
the
two
gauges
is
essentially
that
the
CPI
reflects
what
items
cost
while
the
PCE
adjusts
for
what
consumers
actually
buy,
accounting
for
changes
in
behavior
when
prices
rise
and
fall.

Futures
market
pricing
was
little
changed
after
the
data
release.

Traders
still
largely
expect
the
Fed
to
hold
its
benchmark
overnight
borrowing
rate
steady
when
it
next
meets
in
March,
then
cut
in
May,
to
be
followed
by
four
more
quarter
percentage
point
reductions
by
the
end
of
the
year,
according
to
CME
Group
projections.