US CPI Update

With annual US CPI figures coming in at alarmingly high levels monthly, it is no surprise that inflation is often seen as the silent killer of savings.

To curb the relentless rise in general price levels and mitigate against a potential inflationary spiral, the FED adopted a highly aggressive monetary policy stance in 2022, raising its benchmark interest rate by 75 basis points in four consecutive meetings. Peaking at 9.1% in June 2022, the annual US CPI decreased substantially to 6.5% in December. Still, with the FED hesitant to ease rate hikes, many market participants will be hoping for a sustained decrease in annual inflation rates going into 2023.

With 2022 marking a year in which inflation rose to levels not seen in over 40 years, it seems appropriate to reflect on the last twelve months’ worth of soaring price increases. June’s 9.1% annual CPI rate is the highest year-on-year rise in general price levels since November 1981. The latest annual US CPI figure for December 2022 comes in at 6.5%, well down from 7.1% a month prior, bringing the average yearly inflation rate for 2022 to 8%, the highest average annual rate since 1981, a year in which inflation spiralled out of control and hit record-high levels.

On a seasonally adjusted basis, the Consumer Price Index for All Urban Consumers (CPI-U) declined by 0.1% in December, following a 0.1% increase in November. Furthermore, the food index increased by 0.3% in December, while the energy index decreased by a significant 4.5%.

Despite easing inflation, with annual US CPI coming in at 6.5% for December 2022, food prices continue to soar, with food inflation at 10.4% year-on-year while fuel oil inflation comes in at a staggering 41.5% year-on-year. With six consecutive monthly declines in annual CPI rates, market participants will be optimistic for the FED to ease its restrictive stance as 2023 kicks off.

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