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US inflation rose to 2.9 percent in December, in line with expectations, bolstering the case for the Federal Reserve to slow the pace of interest rate cuts this year.
The Bureau of Labor Statistics data on Wednesday matched the forecasts of economists polled by Reuters and were above November’s figure of 2.7 percent.
Core inflation, which excludes food and energy prices, was 3.2 percent in December compared with 3.3 percent in November.
US stock and government bond futures rose immediately after the release of the latest inflation data. Contracts tracking the S&P 500 stock index added 1.3 percent, while those tracking the tech-rich Nasdaq 100 rose 1.5 percent.
In government bond markets, the policy-sensitive two-year Treasury yield fell 0.07 percentage points to 4.3 percent, while the benchmark 10-year yield — a proxy for global borrowing costs — fell 0.08 percentage points to 4, 71 percent. Yields fall as prices rise.
Fed officials have already signaled that they plan to take a “cautious approach” to cutting rates amid growing concerns that inflation may fall short of the central bank’s 2 percent target.
Most investors and analysts believe the Fed will not cut rates again at its next policy meeting later this month. US central bankers have signaled in their own projections that they will only cut rates by an additional 50 basis points this year.
President-elect Donald Trump, who takes office on Monday, has outlined aggressive plans to impose tariffs on large swaths of imports, implement sweeping crackdowns on undocumented immigrants and enact sweeping tax cuts.
Economists have warned that such plans could further fuel inflation.
