Despite Trump’s Tariff Pressure, U.S. Inflation Holds at 2.7%: Fears of a Price Surge Ease

[Financial News] Contrary to concerns that the Donald Trump administration’s tariff policy could fuel inflation, U.S. consumer prices in December last year rose at a pace in the upper 2% range. Market jitters over a possible tariff-driven resurgence of inflation are expected to ease somewhat.
The United States Department of Labor said on the 13th (local time) that the Consumer Price Index (CPI) for December last year climbed 2.7% from a year earlier. The increase matched November’s pace and was in line with the consensus forecast compiled by Dow Jones. On a month-on-month basis, CPI rose 0.3%, also matching expectations.
The core consumer price index, which excludes volatile food and energy prices, also increased 2.6% year-on-year, unchanged from the previous month. That was below market expectations of 2.8%. On a monthly basis, the core index rose 0.2%, falling short of the 0.3% forecast. The core index is viewed as an indicator that captures the underlying trend in inflation by stripping out short-term price swings.
By component, shelter costs rose 0.4% from the previous month, making the largest contribution to the overall increase in prices. Food prices also climbed 0.7% month-on-month. By contrast, declines in prices for some items, including used cars and household furniture, partially offset the overall rise in the index.
U.S. consumer price inflation had surged into the 9% range in June 2022, then slowed to 2.3% by April last year under the impact of aggressive tightening by the Federal Reserve System (Fed). However, as the effects of the Trump administration’s tariff policy filtered through, the rate climbed back to around 3% in September last year, rekindling fears of a renewed acceleration in inflation.
Although the November inflation rate came in at a lower-than-expected 2.7%, questions were raised about the reliability of the data because the Federal Government Shutdown at the time had constrained data collection. John Williams, president of the Federal Reserve Bank of New York (FRBNY), also acknowledged that some technical factors might have artificially depressed the November reading, and some on Wall Street went so far as to liken the figure to “Swiss cheese full of holes.”
As a result, markets had been laser-focused on the December numbers. With the latest data showing inflation holding at the same pace as the previous month, concerns over inflation are expected to ease to some extent. While the rate still exceeds the Federal Reserve (the Fed)’s 2% inflation target, the limited additional upward pressure on prices is seen as opening the door again to expectations for interest rate cuts.
Weighing the risks of a weakening labor market against those of a renewed rise in inflation, the Fed judged the former to be greater and cut its benchmark interest rate three times in a row from September through December last year. The Federal Open Market Committee (FOMC) is scheduled to meet on January 27–28 to set the course for monetary policy at its first meeting of the year.
Nevertheless, despite the latest CPI report, financial markets still largely expect the benchmark rate to be left unchanged at the January meeting.

km@fnnews.com Kim Kyung-min Reporter