Modest softening in consumer price inflation in December is a positive signal that underlying inflationary forces will likely continue to moderate and allow the Fed to resume rate cuts in H2. While the Consumer Price Index (CPI) is not the measure the Fed uses to guide monetary policy, it is a useful gauge for determining the direction of the Personal Consumption Expenditure (PCE) deflator, which is the Fed’s preferred inflation metric.
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Figure 1. Core CPI inflation ticked down
Sources: Bureau of Labor Statistics, Bureau of Economic Analysis, and The Conference Board.
Nevertheless, despite Core Consumer Price Index (Core CPI) inf
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