In December, U.S. inflation slowed to 6.5%, marking the sixth consecutive monthly deceleration since reaching a peak in mid-2022.
The cost of living for households remains high even though this was the smallest annual increase since October 2021.
With volatile food and energy prices excluded, the so-called core Consumer Price Index (CPI) rose by 0.3%, meeting expectations, up 5.7% from a year ago, both in line with predictions.
The Labor Department's CPI showed a 7.1% increase from the previous year in November. This marked the fifth consecutive month of decrease in annual inflation rate, falling from a peak of 9.1% in June. Despite the recent decrease, the November rate was still much higher than the near 2.1% average seen in the three years prior to the pandemic.
The Federal Reserve has been increasing interest rates aggressively in 2022 to combat inflation by slowing the economy. However, policymakers will likely want to see more compelling evidence of abating price pressures before pausing rate hikes.
These new inflation figures follow other signs of a cooling economy in late 2022, including a decrease in imports and exports, retail sales, manufacturing output, and home sales, as well as slowed job and wage growth in December.
The unemployment rate is still at a five-decade low of 3.5%. Initial claims for state unemployment benefits to 205,000 for the week that ended January 7.
