Inflation Ticked Up in December, But Experts Expect Downward Drift to Resume in 2025
Inflation increased in December, driven by higher energy and food prices, according to the Bureau of Labor Statistics. The consumer price index rose 2.9% annually, up from 2.7% in November and a recent low of 2.4% in September. While this may seem concerning, experts believe that inflation should resume its downward drift in 2025.
However, the trajectory of inflation is closely tied to the policies of President-elect Donald Trump’s incoming administration. Economists warn that if Trump pursues policies such as tariffs and tax cuts, they could stall or reverse the downward trend in inflation.
The consumer price index, which measures the rate of inflation, has been declining significantly since its pandemic-era high of 9.1% in June 2022. However, it remains above the Federal Reserve’s target rate of 2% over the long term. The Fed also uses another inflation measure, the personal consumption expenditures price index, which tends to run about 0.2 to 0.3 percentage points lower than the CPI.
Eggs are a key factor in the recent increase in grocery prices, which rose 0.3% from November to December. The outbreak of avian influenza, also known as bird flu, has significantly impacted egg production, leading to a 37% increase in egg prices since December 2023.
Other areas of concern include gasoline prices, which rose 4.4% from November to December, although this may not reflect the actual experience of consumers at the pump. Shelter inflation continued to retreat, with the 4.6% annual inflation rate for housing in December the lowest since January 2022.
Economists prefer looking at the core CPI, which strips out volatile food and energy prices, to get a more accurate reading of underlying inflationary dynamics. According to this measure, core CPI fell to 0.2% on a monthly basis in December, and the annual core inflation rate fell to 3.2%.
Overall, experts expect inflation to return to its target level by the spring or summer, pending no major policy changes from the Trump administration.
