WASHINGTON—Overall consumer prices decreased a seasonally adjusted 0.1% in December. A 7.5% drop in the gasoline index led the overall consumer price index (CPI) to dip below 2% for the first time since August 2017.
NAFCU Chief Economist and Vice President of Research Curt Long said this lack of inflationary pressures might pause future rate hikes for the time being.
According to data published by the Bureau of Labor Statistics, the overall CPI decelerated to 1.9% over the 12-month period.
"The Federal Reserve signaled in its December meeting minutes that 'in an environment of muted inflation pressures' the FOMC 'could afford to be patient about further policy firming,'" Long said in a Macro Data Flash report.
A ‘Divide Remains’
He further explained that a "divide remains between financial markets and the Fed. Markets currently expect no change to the fed funds rate in 2019, while the Fed's most recent projections call for two rate hikes. The Fed appears more optimistic about growth for the coming year than market participants. But in the absence of inflationary pressures, a rate hike in the first half of 2019 is unlikely."
Core prices (excluding food and energy costs) increased 0.2% in December compared to the previous month. Year-over-year core CPI growth remained at 2.2%.
Energy prices declined 3.5% in December following a 2.2% decrease in November. From a year ago, energy prices were down 0.2%. Food prices rose 0.4% in December – the largest monthly gain since May 2014. On a year-over-year basis, food prices were up 1.6%, Long said.