Inflation rose higher than expected in December, putting chill on imminent Fed cuts

Published

1 year ago

January 12, 2024

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US inflation rose 3.4% in December, a larger-than-expected increase that could delay the prospect of three interest rate cuts the Federal Reserve plans for this year.

December’s Consumer Price Index which tracks changes in the costs of everyday goods and services came in above the 3.2% figure economists at FactSet expected, and marks an advance from the 3.1% growth reading in November — the lowest monthly reading since June.

The latest inflation figure — more than half of which was driven by persistently stiff housing costs — is significantly lower than the 6.5% advance in December 2022.

Still, there’s a ways to go before inflation is tamped down to the Fed’s 2% target — a rate the US economy hasn’t seen in over a decade.

Fed Chair Jerome Powell has said that the 2% reading likely won’t happen until 2025 after they chose to hold the rate steady following their meeting last month. The central bankers had signaled that they would begin cutting the Fed fund rate — currently between 5.25% and 5.50% — this year.

However, Wall Street expectations that a rate cut could come as soon as March were dampened by the stubborn inflation figures. It was further tempered by other data on Thursday showing the labor market remained fairly tight at the start of this year — with the number of people filing new claims for unemployment benefits unexpectedly falling last week.

The data followed news last Friday that the economy added 216,000 jobs in November and annual wage growth picked up.

“The final stretch of the path back to the 2% inflation target could be harder than the market is anticipating,” said Ryan Brandham, head of global capital markets, North America, at Validus Risk Management.

The Bureau of Labor Statistics attributed the CPI increase to the shelter index, which rose 0.4% on a monthly basis and contributed to over half of the monthly all-items increase.

The food index increased 0.2% in December, as it did in November.

And the gas index rose 0.4%, offsetting a decrease in the natural gas index, the federal agency said.

As of Thursday, the average price for a gallon of gas in the US is $3.08, according to AAA data.

Core CPI — a number that excludes volatile food and energy prices — increased 0.3% in December after rising 0.2% in November.

The figure, a closely-watched gauge among policymakers for long-term trends, was also greater than what economists at FactSet expected.

Persistently high inflation poses a threat to President Joe Biden’s prospects for reelection later this year. Frustration over the rising cost of living has weighed on Biden’s popularity, even as other aspects of the economy, including the labor market, have remained favorable.

“Until we see further progress on services inflation, the Fed will likely be worried about upside risks to inflation,” said Stephen Juneau, a U.S. economist at Bank of America Securities in New York.

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After the release of the CPI, several Fed officials indicated that imminent cuts were unlikely.

The next FOMC meeting will be held Jan. 30 to 31, at which point central bankers will decide on whether to keep the borrowing rate at its current rate — the highest Americans have seen since 2006.

The December CPI report “just shows there is more work to do and that work is going to take restrictive monetary policy,” Cleveland Fed President Loretta Mester said in an interview with Bloomberg TV.

“I think we need to see more evidence,” before reducing interest rates, she said, with a March rate cut, currently anticipated by financial markets, “too early in my estimation.”

In separate comments to reporters following a presentation at the Virginia Bankers Association, Richmond Fed President Thomas Barkin said the December inflation report was “about as expected,” with prices rising slowly for goods but shelter and services costs still increasing at a more vigorous pace.

Barkin said that did not add to the sort of “conviction” about future declines in inflation that he feels he would need to begin reducing the Fed’s target interest rate.

“This gap between services and shelter and goods is one that I am watching carefully because you would not want a goods deflationary cycle to end and find yourself disproportionately bearing the cost of shelter and services,” Barkin said.

UK

Eight arrests in connection with two separate terrorism investigations

Published

3 hours ago

May 4, 2025

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Eight arrests in connection with two separate terrorism investigations

Eight men have been arrested by the Metropolitan Police in two unconnected terrorism investigations.

In one operation on Saturday, counter-terror officers arrested five men, four of whom are Iranian nationals. All are in police custody.

The Met said the arrests related to a “suspected plot to target a specific premises”.

In an update shortly after midnight, the force said: “Officers have been in contact with the affected site to make them aware and provide relevant advice and support, but for operational reasons, we are not able to provide further information at this time.”

It added officers were carrying out searches at a number of addresses in the Greater Manchester, London and Swindon areas in connection with the investigation.

It said those detained were:

• A 29-year-old man arrested in the Swindon area
• A 46-year-old man arrested in west London
• A 29-year-old man arrested in the Stockport area
• A 40-year-old man arrested in the Rochdale area
• A man whose age was not confirmed arrested in the Manchester area.

Commander Dominic Murphy, head of the Met’s Counter Terrorism Command, said: “This is a fast-moving investigation and we are working closely with those at the affected site to keep them updated.

“The investigation is still in its early stages and we are exploring various lines of enquiry to establish any potential motivation as well as to identify whether there may be any further risk to the public linked to this matter.

“We understand the public may be concerned and as always, I would ask them to remain vigilant and if they see or hear anything that concerns them, then to contact us.

“We are working closely with local officers in the areas where we have made arrests today and I’d like to thank police colleagues around the country for their ongoing support.”

Terror arrests in separate investigation

Police also arrested three further Iranian nationals in London on Saturday as part of another, unrelated counter terror investigation.

The suspects were detained under section 27 of the National Security Act 2023, which allows police to arrest those suspected of being “involved in foreign power threat activity”.

Home secretary Yvette Cooper said in a statement: “I want to thank the police and our security services for the action they have taken to keep our country safe.

“Protecting national security is the first duty of government and our police and security services have our strong support in their vital work.”

She added: “These are serious events that demonstrate the ongoing requirement to adapt our response to national security threats.”

Politics

Pro-crypto Democrats pull support for stablecoin bill in last minute

Published

3 hours ago

May 4, 2025

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Pro-crypto Democrats pull support for stablecoin bill in last minute

A group of US Senate Democrats known for supporting the crypto industry have said they would oppose a Republican-led stablecoin bill if it moves forward in its current form.

The move threatens to stall legislation that could establish the first US regulatory framework for stablecoins, according to a May 3 report from Politico.

Per the report, nine Senate Democrats said in a joint statement that the bill “still has numerous issues that must be addressed.” They warned they would not support a procedural vote to advance the legislation unless changes are made.

Among the signatories were Senators Ruben Gallego, Mark Warner, Lisa Blunt Rochester and Andy Kim — all of whom had previously backed the bill when it passed through the Senate Banking Committee in March.

The bill, introduced by Senator Bill Hagerty, is formally known as the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act.

Senate prepares to vote on stablecoin bill

The Senate is expected to begin floor consideration of the bill in the coming days, with the first vote potentially taking place next week.

The bill has been championed by the crypto industry as a landmark step toward regulatory clarity. However, the Democrats’ about-face reflects growing unease within the party.

Although revisions were made to the bill after its committee approval to address Democratic concerns, the lawmakers said the changes fell short. They called for stronger safeguards related to Anti-Money Laundering, national security, foreign issuers, and accountability measures for noncompliant actors.

The statement was also signed by Senators Raphael Warnock, Catherine Cortez Masto, Ben Ray Luján, John Hickenlooper and Adam Schiff.

Senator Kirsten Gillibrand and Senator Angela Alsobrooks were absent from the list, who co-sponsored the bill alongside Hagerty.

Despite their objections, the Democratic senators emphasized their commitment to shaping responsible crypto regulation. They reportedly said they “are eager to continue working with our colleagues to address these issues.”

Crypto needs a stablecoin bill

On April 27, Caitlin Long, founder and CEO of Custodia Bank, criticized the US Federal Reserve for quietly maintaining a key anti-crypto policy that favors big-bank-issued stablecoins, despite relaxing crypto partnership rules for banks.

Long explained that while the Fed recently rescinded four prior crypto guidelines, a Jan. 27, 2023, statement was left intact in coordination with the Biden administration.

The guidance, according to Long, blocks banks from engaging directly with crypto assets and prohibits them from issuing stablecoins on permissionless blockchains.

However, Long noted that once a federal stablecoin bill becomes law, it could override the Fed’s stance. “Congress should hurry up,” she urged.

Magazine: Financial nihilism in crypto is over — It’s time to dream big again

UK

Pictured: Boy killed in Gateshead industrial estate fire – 14 children arrested on suspicion of manslaughter

Published

4 hours ago

May 4, 2025

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Pictured: Boy killed in Gateshead industrial estate fire - 14 children arrested on suspicion of manslaughter

Tributes have been paid to 14-year-old Layton Carr who died in a fire at an industrial estate.

Eleven boys and three girls, aged between 11 and 14 years, have been arrested on suspicion of manslaughter after the incident in Gateshead on Friday. They remain in police custody.

Firefighters raced to Fairfield industrial park in the Bill Quay area shortly after 8pm, putting out the blaze a short time later.

Police then issued an appeal for a missing boy, Layton Carr, who was believed to be in the area at the time.

In a statement, the force said that “sadly, following searches, a body believed to be that of 14-year-old Layton Carr was located deceased inside the building”.

Layton’s next of kin have been informed and are being supported by specialist officers, police added.

A fundraising page on GoFundMe has been set up to help Layton’s mother pay for funeral costs.

Organiser Stephanie Simpson said: “The last thing Georgia needs to stress trying to pay for a funeral for her Boy Any donations will help thank you.”

One tribute in a Facebook post read: “Can’t believe I’m writing this my nephew RIP Layton 💔 forever 14 you’ll be a massive miss, thinking of my sister and 2 beautiful nieces right now.”

Another added: “My boy ❤️ my baby cousin, my Layton. Nothing will ever come close to the pain I feel right now. Forever 14. I’ll miss you sausage.”

A third said: “Rest in peace big lad such a beautiful soul taken far to soon my thoughts are with you Gee stay strong girl hear for u always.”

Detective Chief Inspector Louise Jenkins, of Northumbria Police, also said: “This is an extremely tragic incident where a boy has sadly lost his life.”

She added that the force’s “thoughts are with Layton’s family as they begin to attempt to process the loss of their loved one”.

They are working to establish “the full circumstances surrounding the incident” and officers will be in the area to “offer reassurance to the public”, she added.

A cordon remains in place at the site while police carry out enquiries.