Inflation ticks back up as housing prices stay stubbornly high

• Recently released data from BLS shows inflation was still above the target at the end of 2023.
• The consumer price index increased by 3.4% from December 2022 to December 2023.

December's consumer price index climbed 3.4% year over year, according to data the Bureau of Labor Statistics released Thursday.

That increase is higher than the 3.1% rise in November. The year-over-year CPI increase was expected to be 3.2% for December. The new data point means that while inflation cooled during a lot of 2023, it ticked back up and was still above the Fed's 2% target as the year closed.

"Inflation, as measured by the CPI, is moving in the right direction but this release should squash any notion investors had of a March rate cut from the Fed," Greg McBride, the chief financial analyst for Bankrate, said.

After CPI rose by 0.1% month over month in November when looking at the seasonally adjusted change, CPI rose by 0.3% from November to December — just above the forecast of 0.2%.

"The index for shelter continued to rise in December, contributing over half of the monthly all items increase," the news release from BLS said.

Core CPI, excluding volatile food and energy prices, increased by 3.9% after a 4.0% year-over-year increase in November. December's percent change was above the expected 3.8%.

Core CPI increased by 0.3% in December from the previous month. That was also the forecast for this measure, and November's month-over-month increase was also 0.3%.

"The energy index rose 0.4 percent in December, after decreasing 2.3 percent in November," the latest BLS news release about the CPI data said. "The gasoline index increased 0.2 percent in December, following a 6.0-percent decrease in the previous month."

Year over year, the energy index declined by 2.0% in December, which wasn't as large as the 5.4% year-over-year drop in November.

The food index rose by 0.2% in December from November, the same month-over-month increase as the one prior.

The food index increased by 2.7% year over year after an increase of 2.9% in November. That means this index continued to cool, as has been the case throughout the year.

The shelter index has also been cooling based on year-over-year percent changes. The index rose by 6.2% in December, just below the 6.5% increase in November. It has slowed since the peak earlier in the year but is still elevated. Meanwhile, the shelter index rose by 0.5% month over month in December, slightly higher than the month-over-month increases seen in October and November.

Despite some acceleration during part of the year, inflation generally cooled in 2023. The year-over-year changes were below the peak in June 2022.

"Inflation has eased from its highs, and this has come without a significant increase in unemployment," Jerome Powell, the chair of the Federal Reserve, said in a press conference held in December.

Data out last Friday added to Powell's point. December's unemployment rate, part of the workforce data released on Friday, showed the rate was 3.7% for the second month in a row.

Powell noted at the December press conference that "inflation is still too high."

"As we look ahead to next year, I want to assure the American people that we're fully committed to returning inflation to our 2% goal," Powell said. "Restoring price stability is essential to achieve a sustained period of strong labor market conditions that benefit all."

The Federal Open Market Committee will meet at the end of the month.