Consumer Inflation Surges 3.4% in December, Biden Faces Economic Headwinds

Consumer inflation in the United States rose more than expected in December, according to government data released Thursday. The Department of Labor's consumer price index (CPI) showed a 3.4 percent increase from a year ago, higher than the previous month. President Joe Biden acknowledged the need for more action to address high prices, as he heads into his reelection campaign facing persistent negative perceptions about the economy.

Despite the uptick in CPI, underlying pressures appear to be easing, as a key metric that strips out volatile food and energy prices cooled to 3.9 percent in December 2023, the lowest since May 2021. However, a rising inflation figure complicates the economic picture for Biden, who has been touting achievements such as a growing economy and low unemployment. The Federal Reserve's interest rates have been held at a 22-year high in an effort to ease demand and sustainably lower inflation. Although inflation has fallen significantly from its peak in June 2022, the CPI rose 0.3 percent from November to December, led by increases in shelter and energy costs.

Cleveland Fed President Loretta Mester noted that the report doesn't change her view of the economy's trajectory, stating that restrictive monetary policy will be necessary to address ongoing challenges. Experts expect the Fed to wait for more data before making any changes to interest rates. While there has been some progress, strong core CPI inflation continues to be a concern for policymakers.