December inflation clouded the Fed’s view on rate cuts.

Annual inflation rose to 2.9 percent in December, slightly higher than the previous month’s annual rate of 2.7 percent, according to the Consumer Price Index (CPI). Released by the Bureau of Labor Statistics (BLS)

Inflation rose 0.4% in December, beating expectations. Core CPI, which excludes food and labor, rose 0.2% in December, coming in below estimates after four consecutive months of 0.3% gains. This brought the year-over-year rate to 3.2 percent.

Energy prices rose 2.6 percent and were the largest contributor to the monthly increase in December, accounting for 40 percent of the monthly increase in all goods. Gas rose 4.4% in the month. Food price inflation rose 0.3% last month after a 0.4% increase in November.

“December’s CPI report brings a mix of news, including some glimmers of optimism,” US First Chief Economist Sam Williamson said in a statement. “While headline CPI rose more than expected and did better than expected, the monthly increase was less volatile and the closely watched Core CPI was tepid and below expectations.

“This surprise low in Core CPI is encouraging, but one month doesn’t make a difference,” Williamson continued. “The Federal Reserve will need to see sustained growth before considering any rate cuts.”

The Federal Reserve cut interest rates by a quarter percentage point in December, from 4.25% to 4.5%, but in 2018 Minutes from the Federal Open Market Committee The meeting showed that higher inflation and a clear divide among the Fed’s members are raising concerns about the inability to keep rates going. Some expressed support for keeping the central bank’s key rate unchanged, while most officials said a rate cut was a close call, the minutes said. The next meeting of the federation will be on January 28 and 29.

“The December CPI numbers are not showing that inflation is slowing at a pace that meets the Fed’s target,” said Ryan Marshall, CEO of Voxture Analytics. “As a result, those who had hoped the Fed would cut interest rates further in 2025 are adjusting their forecasts to expect less rate cuts this year.”

If you’re struggling with high inflation, you can lower your monthly payments and take out a personal loan to pay off debt at a lower interest rate. Visit credible to get your personal interest rate without affecting your credit score.

Biden canceled more student loans with a week left

Accommodation costs remain high.

Housing costs rose 0.3% on a monthly basis, the same pace as last month, which helped the annual inflation rate drop to 4.6% from 4.7% last month, said Daniel Hall, chief economist for Realtor.com.

Despite some improvement, shelter costs remain above pre-pandemic levels, averaging 3.3%, Hale said. Higher costs could stop further rate cuts, affecting the level of long-term rates such as mortgage rates, which are below 7 percent.

“Right now, the market doesn’t bring high odds before June,” Hale said in a statement. “The labor market ended 2024 on a strong note, with hiring ending and the unemployment rate falling to 4.1% in December. Half of full employment is on a firmer footing than the Fed’s dual mandate, especially if inflation continues to loom higher than projected three to six months ago. can

If you’re looking to buy a home, consider visiting Credible to find the best mortgage rate for your financial situation.

The FHFA has announced higher mortgage lending limits for 2025

The view of housing is shaky.

Higher mortgage rates will further stagnate the housing market even with willing buyers, Hale said. Home ownership remains a central goal for 75% of Americans Survey by Realtor.comBut affordability is a concern for many.

“Available home sales have improved in recent months following the fall in low mortgage rates, but as rates continue to rise, our expectations for home sales have decreased,” Hale said.

Expectations for housing remain the same relative to mortgage rates, and home prices are expected to continue to rise. One bright spot is the incoming president. Donald Trump Management can stimulate more significant economic growth and thus higher incomes give Americans more purchasing power. In addition, lower household tax rates are expected to increase household disposable income, even if they do not increase income. Realtor.com housing forecast.

“Realtor.com’s housing forecast for 2025 expects a modest decline in mortgage rates to fuel a modest increase in home sales,” Hale said. Every drop in inflation helps bring that hope to reality.

If you think you’re ready to shop for a home loan, use Credible to help you quickly compare interest rates from multiple lenders in minutes.

Seniors will receive a modest cost of living reduction in social security payments next year

Have a finance-related question, but don’t know who to ask? Email a trusted money expert moneyexpert@credible.com And your question can be answered by Credible in our Money Expert column.