Mary Mannion

Senior Communications Associate for J.P. Morgan Wealth Management

The Bureau of Labor Statistics released its December 2023 Consumer Price Index (CPI) report, marking a 0.3% increase in December, following a 0.1% rise in November.1 As always, this print raises the question of how the Federal Reserve (Fed) may respond in terms of rate hikes or cuts moving forward.

“While the December CPI report was not necessarily soft, it still indicates a moderating trend in inflation and was largely in line with expectations,” said Sarah Stillpass, Global Investment Strategist for J.P. Morgan Wealth Management.

Over the past 12 months, the all-items index has climbed 3.4% before seasonal adjustment, a figure that aligns closely with market expectations but still points to ongoing inflationary pressures.

Key components

“Diving into the numbers, core services remain elevated and shelter inflation is declining, albeit at a slower clip,” Stillpass said.

Core inflation, which excludes the often volatile food and energy items, was expected to rise 3.8% year-over-year in December, following a 4% increase in November. However, core prices climbed 0.3% month-over-month in December at the same rate as November’s increase, making the year-over-year increase total 3.9%.

The index for shelter continued to rise in December, contributing to over half of the monthly all-items increase. The cost of rent increased by 0.4% month-over-month, a slight decrease from November's 0.5% rise. On a year-over-year basis, rent has surged nearly 35%, highlighting the ongoing challenges in the housing market. Other core sectors that rose notably were health care and auto repair offsetting declines in other areas like consumer goods.2

The energy index's 0.4% rise over the month, driven by increases in the electricity and gasoline indices, slightly offset a decrease in the natural gas index. Equally important, the food index also increased by 0.2% in December, mirroring its November rise. The index for food at home went up by 0.1%, and food away from home rose by 0.3%. A striking 8.9% increase in egg prices stood out as an outlier in a month where other food categories saw only modest increases or decreases. Looking at the broader 12-month period, the energy index fell by 2%, contrasting with a 2.7% increase in the food index.

Fed implications?

Though inflation has slowed down significantly, especially when compared to the 6.5% core inflation rate from December 2022, there’s still a ways to go in reaching the Fed’s 2% target. Keep in mind, too, that this CPI report comes on the heels of hotter-than-expected December 2023 jobs data, which momentarily unsettled some investors.

“We do not think this recent batch of data changes the outlook or policy path for the Fed, but it possibly limits the likelihood of rate cuts coming in the first quarter,” said Stillpass.

The December CPI report paints a picture of continued inflationary pressures that are easing. The moderation in core prices, combined with the mixed performance of the energy and food indices, indicates a complex, but positive-leaning economic landscape.

“We still see rate cuts occurring by the second half of this year,” said Stillpass.

As the Fed weighs these factors, the path of monetary policy in 2024 will be critical in shaping the economic outlook for both consumers and markets.



Bureau of Labor Statistics, “Consumer Price Index Summary” (January 2024)


Bureau of Labor Statistics, “Table 2. Consumer Price Index for All Urban Consumers (CPI-U): U. S. city average, by detailed expenditure category” (January 2024)

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