December Consumer Price Index (CPI) Inflation data showed month-on-month deflation with prices falling 0.1%, primarily due to lower energy prices. However, despite the monthly decline, inflation is still running at 6.5% year-on-year compared to the U.S. Federal Reserve’s (Fed’s) 2% goal.
In addition, services inflation, which the Fed is watching closely, rose 0.5% for the month, driven by mainly by rising housing costs. Although inflation has eased since the summer, the Fed is expected to take a cautious approach, likely hike rates on February 1. A 0.25 percentage point rise in rates at that meeting, is viewed as most likely by bond markets.
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