• Headline CPI rose 7.0% YoY as expected in December.
  • But the MoM pace of headline price growth, as well as Core CPI measures were above expected.  

Inflation in the US, as measured by the Consumer Price Index (CPI), rose to 7.0% on a yearly basis in December from 6.8% in November, the US Bureau of Labor Statistics reported on Wednesday. That was the highest reading since June 1982 and was in line with the median economist forecast for a reading of 7.0%. The MoM pace of price increases as per the CPI came in at 0.5%, slightly above expectations for a MoM gain of 0.4%, though still marking a deceleration from November's 0.8% MoM reading.

Core CPI rose at a pace of 5.5% YoY, above market expectations for a 5.4% reading and a significant jump from November's 4.9%. The pace of Core price growth was also faster than expected MoM, coming in at 0.6% versus forecasts for it to remain unchanged at 0.5%.  

Many economists argue that consumer price inflation in the US peaking in December, or will do so by the end of Q1 2022 given early indications that supply chain disruptions that have driven up costs are easing. But the rapid spread of the Omicron variant, which has been highly disruptive for businesses, threatens this thesis and may delay supply chain normalization.  

Market Reaction

Despite core CPI measures coming in hotter than expected, the Dollar Index has seen some downside in the initial market reaction to the latest CPI report. The DXY has in recent trade dipped below the 95.50 level breaking below its late-November lows and hitting its lowest since November 15. 

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