Inflation slows to 6.5% in December

Annual inflation fell to 6.5% in December, raising hopes that the sweltering price rise is easing.

CPI for the month was lower than November’s 7.1%. December saw the index’s smallest increase since October 2021. The drop in the rate was due to a drop in gasoline prices, airline tickets and used cars and trucks, according to the Bureau of Labor Statistics.

The cost of housing, household goods, recreation and clothing increased.

Some economists expressed optimism about the number, although great caution must still be exercised in declaring inflation under control. The rate is still far from the Federal Reserve’s overall target of 2% on an annual basis.

Moody’s Analytics Chief Economist Mark Zandi wrote on Twitter: “Inflation is on its heels. Consumer price inflation in December could not have been much better, slowing to 6.5% year-on-year. Last June it peaked at 9%. It’s a long way to get back to the Fed’s inflation target, which is 2.5% for the CPI. But it’s on the right track.”

There is concern about the continued rise in the cost of services such as health care and hospitality, as well as the possibility of a further rise in oil prices.

“The cost of housing services, which make up 1/3 of the CPI, will drop sharply later this year,” Zandi wrote. “Rents for new leases fall suddenly as the supply of rental units increases with loosened supply chains and more workers and demand is dampened by the previous rise in rents.”

Professor Justin Wolfers of the University of Michigan wrote that the latest report was “damn good news”. He pointed out that the average price level fell by 0.1%.

“The point is that the inflation crisis is not over yet, but we are on the right track. Looks like the worst is over,” he wrote.

President Joe Biden is expected to comment on the latest report this morning.