Home US The Most Important Inflation Number in Years Shows Prices Are Still Rising — Here’s Why It’s Already Impacted Your 401(K)

The Most Important Inflation Number in Years Shows Prices Are Still Rising — Here’s Why It’s Already Impacted Your 401(K)

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Consumer prices rose 2.9 percent from a year earlier in December, slightly more than the previous month

Consumer prices rose 2.9 percent from a year earlier in December, slightly more than the previous month.

The inflation data released Wednesday by the Bureau of Labor Statistics is seen by some as the most important in years because it could provide an indication of the path the Federal Reserve may take in 2025.

This, in turn, will impact U.S. credit card rates, auto loans, 401(K) retirement accounts and mortgages.

Prices rose 0.4 percent month-on-month, slightly higher than economists’ forecasts, after rising 0.3 percent in November.

This is the third consecutive increase in annual inflation, after falling to a three-and-a-half-year low of 2.4 percent in September. In November, prices rose by 2.7 percent year on year.

The new data suggests that the final hurdle to reducing inflation is proving to be a challenge for the Fed.

Markets now estimate a more than 97 percent chance that the central bank will keep rates steady at its next meeting later this month, but some analysts predict further cuts are on the table later this year.

Stock market futures rose after the data release as it showed core inflation had unexpectedly slowed last month.

Consumer prices rose 2.9 percent from a year earlier in December, slightly more than the previous month

Futures tied to the Dow Jones Industrial Average rose 1.5 percent, while S&P 500 futures rose 1.5 percent.

Core inflation, which excludes volatile food and energy indexes, rose 3.2 percent, lower than the previous month and better than the forecast of 3.3 percent.

Rising stock market returns are good news for Americans who have invested in 401(K) and IRA retirement plans, which are typically invested in the major market indexes.

That means when Wall Street makes profits, so do their savings.

Seema Shah, chief strategist at Principal Asset Management, said the Fed could cut spending in March if inflation rates remain on track.

“Today’s CPI should give markets a boost, allaying some fears that the US is in the early stages of a second wave of inflation.

‘This is certainly not enough for the Fed to cut interest rates in January. But if today’s numbers were accompanied by new soft CPI pressure next month plus a weakening in labor costs, a rate cut could even be back on the table in March.”

Stock market futures rose after the data release as it showed core inflation had unexpectedly slowed last month

Stock market futures rose after the data release as it showed core inflation had unexpectedly slowed last month

Some traders expected Wednesday to be the busiest CPI day since March 2023 Bloomberg.

“All eyes are now on Wednesday’s CPI report, which may be the most important inflation read in recent history as it will fuel Fed-obsessed sentiment in the market,” SWBC’s Chris Brigati said on Tuesday.

Consumers continue to feel persistent price pressure in key areas including energy and food.

Energy costs were responsible for more than 40 percent of the monthly price increases, while the gas index rose by 4.4 percent in December.

Food prices also remained high, with everyday products such as meat, eggs, grains and bakery products all rising monthly.

According to data from the Bureau of Labor Statistics, housing, airfares, used cars and trucks, new vehicles and auto insurance all increased in price in December.

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