Inflation slows down in December, according to CPI, yet food costs continue to climb

Understanding the Latest Inflation Data

If you’ve found yourself spending more on everyday items like milk and oranges, the most recent inflation report likely comes as no shock. While the data indicates that inflation in the U.S. eased a bit in December, it also highlights that the price increases most noticeable to shoppers—especially at supermarkets—are still very much present.

Key Takeaways from the Report

Core inflation, which strips out food and energy prices, climbed by 0.2% in December, coming in just under expectations. This aligns with the growing belief that inflation is gradually approaching the Federal Reserve’s 2% goal.

The overall Consumer Price Index (CPI) matched analyst predictions, thanks in part to a significant decrease in used car prices. This drop is partly due to the ongoing challenge many buyers face in affording used vehicles, as prices remain high and average monthly payments hover in the mid-$500 range, according to industry experts.

Grocery Bills Continue to Rise

Despite some positive trends, food prices continued their upward trajectory in December, putting pressure on household budgets even as overall inflation shows signs of improvement. Although food inflation has slowed from its highest point, it remains one of the most persistent and impactful components of the index—directly affecting consumers.

According to the latest figures, five out of six major grocery categories saw price increases last month. Specifically, the “other food at home” category jumped 1.6%, cereals and bakery products rose 0.6%, fruits and vegetables went up 0.5%, nonalcoholic beverages increased 0.4%, and dairy products climbed 0.9%. In short, nearly every aisle in the grocery store saw higher prices.

Other Cost Pressures Remain

Housing expenses also continued to edge up, though the rate of increase is slowing. Rent for primary residences saw their smallest annual rise since 2021, suggesting that housing inflation may finally be easing. Meanwhile, energy costs ticked higher, underscoring that inflationary pressures haven’t disappeared entirely.

Looking ahead, most analysts, prediction markets, and Federal Reserve observers anticipate the central bank will keep interest rates unchanged for now. While policymakers are encouraged by the gradual slowdown in inflation, they remain cautious. Additionally, increasing political pressure from the White House could actually make the Fed more hesitant to lower rates, rather than more willing.

Summary

The December inflation report offers some reassurance that price growth is slowing. However, it also explains why many Americans still feel the pinch of rising costs. Until grocery prices begin to fall, the impact of inflation will continue to be felt more acutely than headline figures might suggest.