U.S. inflation may be stronger than it looks

December CPI rose 2.7% year-on-year while food prices jumped 0.7% month-on-month, the largest monthly food increase since October 2022.

U.S. consumer price data for December showed a modestly softer headline reading but signs of persistent pressure beneath the surface. The CPI rose 2.7% year-on-year and core CPI excluding food and energy was 2.6%. At the same time, food prices surged 0.7% for the month, a sharp move that stands out for households. Analysts say the Federal Reserve’s preferred measure, PCE inflation, could read higher for December, and its release has been delayed until February 20. Key points: - December CPI rose 2.7% year-on-year. - Core CPI (ex food and energy) increased 2.6% year-on-year, a tenth below forecasts. - Food prices climbed 0.7% month-on-month, the largest monthly rise since October 2022. - Barclays and Morgan Stanley raised their December monthly PCE forecasts to just under 0.5%, and BNP Paribas expects December PCE to be notably higher than CPI. - The December PCE report has been delayed until February 20 due to the government shutdown. Summary: The December CPI showed continued price pressures, especially in food, while underlying measures used by policymakers may be higher. The delayed December PCE release on February 20 is the next scheduled data point that could clarify how inflation is evolving.