The US has seen a decline in prices for the first time in over a year, as the latest consumer price index (CPI) shows a drop of 0.1% in December.
The annual rate of inflation has dropped to 6.5% from 7.1% the previous month, marking the sixth consecutive month of yearly declines, said the Labor Department said on Thursday.
The core CPI, which also excludes volatile food and energy components rose 0.3% in December following a 0.2% increase in November. This figure saw a 5.7% rise in the past 12 months, up from a 6% increase the previous year.
In June, inflation in the US reached its highest level in decades, at 9.1%. This spike was caused by a combination of factors, including the impact of the war in Ukraine on energy prices, and disruptions to supply chains caused by the ongoing COVID-19 pandemic, which led to increases in the cost of goods and services. This was the highest inflation rate seen since 1982.
Even though the decline is encouraging, the inflation rate remains more than three times higher than the Federal Reserve’s annual target rate of 2%.
Experts predict that the rate of inflation will remain elevated throughout 2023. The Fed has been raising interest rates at an unprecedented pace in order to control the cost of living crisis. In December, they announced their seventh hike of the year.
While this downtrend in inflation may be viewed positively, the Federal Reserve will likely wait for more substantial evidence of declining price pressures before considering a halt to interest rate increases.
In the week ending January 7, the advance figure for seasonally adjusted initial claims was 205,000, a decrease of 1,000 from the previous week’s revised level. The previous week’s level was revised up by 2,000 from 204,000 to 206,000. The 4-week moving average was 212,500, a decrease of 1,750 from the previous week’s revised average. The previous week’s average was revised up by 500 from 213,750 to 214,250.