Inflation cools in December, CPI shows, but grocery prices rise

Core Insights - U.S. inflation is showing slight cooling, but price pressures, especially in grocery stores, remain significant [1][2] Inflation Metrics - Core consumer prices rose by 0.2% in December, slightly below forecasts, indicating a gradual approach towards the Federal Reserve's 2% target [2] - Headline CPI met analyst expectations, aided by a notable drop in used car prices, although affordability issues persist [3] Grocery Prices - Food prices continued to rise in December, contributing to tight household budgets despite a broader inflation stabilization [4] - Five out of six major grocery store food group indexes increased in December, with specific increases: other food at home up 1.6%, cereals and bakery products up 0.6%, fruits and vegetables up 0.5%, nonalcoholic beverages up 0.4%, and dairy products up 0.9% [5] Shelter and Energy Costs - Shelter costs are still rising, but at a slowing pace, with rents showing the smallest year-over-year increase since 2021, indicating a potential slowdown in housing inflation [6] - Energy prices have also edged higher, suggesting that inflationary pressures are not fully alleviated [6] Federal Reserve Outlook - Analysts and prediction markets expect the Federal Reserve to maintain steady interest rates for the time being, reflecting a cautious approach despite the cooling trend in inflation [7] - Political pressure from the White House may complicate the Fed's decision-making, potentially making them more hesitant to cut rates [7]