Inflation in December Was Even Lower Than Initially Reported

February 9, 2024

The prices consumers paid for goods and services during the past few months rose at a slower pace than initially reported, according to recent revisions from the Labor Department’s Bureau of Labor Statistics, and while the revision was relatively small, it could still mean big things for the Federal Reserve’s thinking.

Revisions to the consumer price index (CPI) showed that the prices that consumers pay for a common basket of goods and services increased 0.2% last month instead of the 0.3% initially reported. The so-called “core” CPI, which excludes volatile components like food and energy, increased 0.3% for the month, the same as originally reported. On the flipside, November’s reading was revised higher, up 0.2% instead of the initial report of 0.1%.

Taking a wider timeframe view, the various monthly revisions indicate that CPI accelerated at a 2.7% annualized rate during the fourth quarter, down 0.1 percentage point from what was initially reported. 

While the change is minuscule, it does help confirm that inflation was moderating at the end of 2023 and gives more leeway for the Fed to begin cutting rates later this year. 

Such revisions usually do not garner much attention, but they have been closely watched recently. Last year, after revised data showed that inflation in 2022 rose more than initially reported, Treasury yields surged and investors worried that the Fed would have to maintain a more restrictive stance.

Now, the muted revisions could exert some influence over Fed officials who were worried about a repeat of last year’s scenario, and the lack of any meaningful change clears the way for the Fed to cut rates potentially as soon as May.

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