As the economy continued to show signs of weakening, price growth in the United States slowed down in December. In comparison to the previous year, inflation reached 6.5%.
That figure was lower than the 7.1% seen in November, but it was in line with analysts’ expectations. In December, inflation fell by 0.1% month over month, which was in line with expectations.
The Federal Reserve’s interest rate hikes are likely to be deemed successful by the slowing rate of inflation, but Chair Jerome Powell has not yet indicated any immediate strategy to significantly reduce those increases until inflation approaches 2%.
A robust labor market continues to boost the economy. The unemployment rate fell to 3.5% last week, which is a 53-year low, according to the Bureau of Labor Statistics. However, the 10.5 million job openings it reported still show how difficult it is for businesses to find workers.
Despite the fact that that number has decreased from its peak prior to the pandemic, many employers are raising wages as a result. That’s good news for workers, but some Federal Reserve officials think that those pay raises will probably cause customers to pay more.
Powell said that to be clear, strong wage growth is a good thing. However, wage growth must be consistent with 2% inflation for it to be sustainable.