Inflation crept up again in December, driven mostly by a jump in energy prices, according to the latest Consumer Price Index report. If you’re waiting for relief from high interest rates, you’ll have to wait a bit longer.
The report showed that prices rose by 2.9% annually in December, as most experts expected. Core inflation, which excludes food and energy categories, rose 3.2% year over year, slightly less than expected.
A sharp increase in energy prices, which had been on the decline for much of 2024, accounted for 40% of inflation’s increase, the Bureau of Labor Statistics stated in its report. The gas index rose 4.4% month over month, compared to November’s 0.6% increase. Piped gas also increased 2.4% for the month.
What this means for this month’s Fed meeting
The Federal Reserve meets at the end of the month, and experts expect the central bank will hold rates steady. With inflation regaining momentum in the final quarter and the jobs market remaining strong — unemployment dropped back to 4.1% in December according to the latest jobs report — it’s looking increasingly unlikely that the Fed will cut interest rates anytime soon.
Economist Robert Fry says he doesn’t expect the Fed to make another rate cut until the end of this year.
“I think the Fed needs at least one month, probably several, with the core PCE price index rising less than 0.2% to justify a rate cut,” he said in an email.
How to combat high home energy prices
Multiple factors contributed to the spike in energy prices in December, including frigid temps across much of the country as well as continued geopolitical unrest. If you’re seeing your energy bill spike amid the latest batch of cold weather, there are steps you can take to combat rising prices, including the following:
- Set your thermostat to a lower temperature, and drop it a few more degrees when you go to bed. You can use a smart thermostat to set up a schedule so you don’t have to remember to adjust the temperature each night.
- Use weatherstripping to seal drafty windows and cracks around your doors.
- Use a space heater to warm only the rooms you’re using. Just make sure you plug it directly into the wall.
While these changes may not offset price spikes completely, they could help lower your monthly costs.