Please ensure Javascript is enabled for purposes of website accessibility
US Inflation Lingers, Tariffs Threatened by Trump Could Nudge Prices in Wrong Direction
gvw_ap_news
By Associated Press
Published 7 days ago on
January 31, 2025

Inflation gauge rises as Trump's tariff threats loom, potentially pushing prices higher in coming months. (AP/David Zalubowski)

Share

WASHINGTON — An inflation gauge closely watched by the Federal Reserve rose slightly last month, while some underlying prices pressures showed signs of easing.

The latest inflation figures arrive as President Donald Trump has threatened to impose big import taxes on goods from Canada and Mexico, potentially affecting everything from autos to avocados, which could push prices higher in the coming months.

Friday’s report from the Commerce Department showed that consumer prices rose 2.6% in December from a year earlier, up from a 2.4% annual pace in November and the third straight increase. Excluding the volatile food and energy categories, core prices increased 2.8% compared with a year ago, the same as in November and October.

Positive Signs in Inflation Report

There were some positive signs in Wednesday’s report, however. When measured in shorter time frames, inflation is slowing: In December, core prices ticked up 0.2% from the previous month, a pace that is nearly consistent with the Fed’s annual target. Economists — and Fed officials — pay close attention to core prices because they provide a better read on where inflation is headed.

The figures arrive just two days after Federal Reserve officials, led by Chair Jerome Powell, decided to pause their interest rate cuts in part because inflation has largely been stuck at about 2.5%, above their 2% target, for the past six months.

In the past three months, core prices have risen at an annual rate of just 2.2%, down from 2.6% in November.

Potential Impact of Tariffs on Inflation

Many businesses raise prices at the start of the year, which could push up inflation a bit when January’s figures are released next month. But the Fed’s preferred gauge should decline steadily in the next few months, economists say, as higher inflation readings early last year fall out of the year-over-year figures.

“Beyond that, however, the growing risk that Trump will impose tariffs a little earlier than we are assuming presents an upside risk to inflation,” Paul Ashworth, chief North America economist at Capital Economics, a forecasting firm, said in a written note.

Overall inflation climbed 0.3% in December from the previous month, driven higher by a jump in gas prices. Monthly increases at that level, if they continued, would exceed the Fed’s target.

Consumer Spending and Income

The Commerce Department’s report also showed consumer spending rose a healthy 0.7% in December from the previous month, fueled in part by steady wage gains and higher stock prices and home values. Incomes rose 0.4%, the government said. With spending outpacing incomes, the savings rate fell to 3.8% from 4.1%.

Americans specifically ramped up spending on goods, such as electronics and furniture, likely a sign that consumers are buying more manufactured products, many of which are imported, before the potential imposition of tariffs that Trump has threatened to implement.

Underlying trends point to lower inflation ahead. Apartment rental prices and other housing costs are slowly moderating. And a sluggish labor market has meant wage growth has slipped, which means companies are under less pressure to raise prices to offset higher labor costs.

“We seem to be set up for further progress,” Powell said Wednesday at a news conference, referring to inflation. “But being ‘seem to set up for’ it is one thing, having it is another. So we’re going to want to see further progress on inflation.”

Until then, Powell suggested, the Fed is likely to keep its key rate at about 4.3%, down a full percentage point from a two-decade peak last year before three cuts at the end of 2024. The Fed expects higher borrowing costs will weigh on spending and bring inflation down further.

Consumers, meanwhile, powered strong growth in the final three months of last year, when the economy expanded at a solid 2.3% annual rate. Growth was stronger in the July-September quarter, at 3.1%, but the fourth-quarter expansion was held back by a sharp reduction in business inventories, which should reverse in coming quarters.

RELATED TOPICS:

DON'T MISS

San Diego Added to Southwest’s Nonstop Destinations From Fresno Airport

DON'T MISS

Clovis Man Gets 27 Years to Life for Attempted Murder of Estranged Wife

DON'T MISS

$3 Million Gift Will Mean Laptops, Solar Panels, Larger Chapel for This Fresno University

DON'T MISS

Ohtani’s Ex-Interpreter Is Sentenced to 4 Years and 9 Months in Sports Betting Case

DON'T MISS

NCAA Changes Transgender Policy to Limit Women’s Competition to Athletes Assigned Female at Birth

DON'T MISS

Israel Starts Planning for Palestinians to Leave Gaza Despite International Rejection

DON'T MISS

Mayor Says Fresno Needs High-Speed Rail Despite Cost Overruns

DON'T MISS

12 States to Sue Over DOGE Access to Government Payment Systems Containing Personal Data

DON'T MISS

Irv Gotti, Music Executive Who Created Murder Inc. Records, Dies at 54

DON'T MISS

ABC30 Has a New News Director. She’s a Familiar TV Face.

UP NEXT

Clovis Man Gets 27 Years to Life for Attempted Murder of Estranged Wife

UP NEXT

$3 Million Gift Will Mean Laptops, Solar Panels, Larger Chapel for This Fresno University

UP NEXT

Ohtani’s Ex-Interpreter Is Sentenced to 4 Years and 9 Months in Sports Betting Case

UP NEXT

NCAA Changes Transgender Policy to Limit Women’s Competition to Athletes Assigned Female at Birth

UP NEXT

Israel Starts Planning for Palestinians to Leave Gaza Despite International Rejection

UP NEXT

Mayor Says Fresno Needs High-Speed Rail Despite Cost Overruns

UP NEXT

12 States to Sue Over DOGE Access to Government Payment Systems Containing Personal Data

UP NEXT

Irv Gotti, Music Executive Who Created Murder Inc. Records, Dies at 54

UP NEXT

ABC30 Has a New News Director. She’s a Familiar TV Face.

UP NEXT

California’s EV Sales Stall. So What Happens to Landmark Mandate?

Ohtani’s Ex-Interpreter Is Sentenced to 4 Years and 9 Months in Sports Betting Case

13 hours ago

NCAA Changes Transgender Policy to Limit Women’s Competition to Athletes Assigned Female at Birth

13 hours ago

Israel Starts Planning for Palestinians to Leave Gaza Despite International Rejection

13 hours ago

Mayor Says Fresno Needs High-Speed Rail Despite Cost Overruns

13 hours ago

12 States to Sue Over DOGE Access to Government Payment Systems Containing Personal Data

13 hours ago

Irv Gotti, Music Executive Who Created Murder Inc. Records, Dies at 54

13 hours ago

ABC30 Has a New News Director. She’s a Familiar TV Face.

14 hours ago

California’s EV Sales Stall. So What Happens to Landmark Mandate?

15 hours ago

31 Arrested in Fresno Human Trafficking Operation

15 hours ago

Find Your Next Career Opportunity Today at FUSD Expo

15 hours ago

San Diego Added to Southwest’s Nonstop Destinations From Fresno Airport

Southwest Airlines added a fourth nonstop destination to routes to and from Fresno Yosemite International Airport. Beginning Oct. 2, travele...

11 hours ago

11 hours ago

San Diego Added to Southwest’s Nonstop Destinations From Fresno Airport

11 hours ago

Clovis Man Gets 27 Years to Life for Attempted Murder of Estranged Wife

12 hours ago

$3 Million Gift Will Mean Laptops, Solar Panels, Larger Chapel for This Fresno University

Ippei Mizuhara, former interpreter for Los Angeles Dodgers baseball star Shohei Ohtani arrives at federal court for bank and tax fraud sentencing on Thursday, Feb. 6, 2025, in Santa Ana, Calif. (AP/Damian Dovarganes)
13 hours ago

Ohtani’s Ex-Interpreter Is Sentenced to 4 Years and 9 Months in Sports Betting Case

The San Jose State University Spartans line up for the playing of the national anthem and player introductions for their NCAA Mountain West women's volleyball game against the Colorado State University Rams in Fort Collins, Colo., on Oct. 3, 2024. (AP File)
13 hours ago

NCAA Changes Transgender Policy to Limit Women’s Competition to Athletes Assigned Female at Birth

13 hours ago

Israel Starts Planning for Palestinians to Leave Gaza Despite International Rejection

13 hours ago

Mayor Says Fresno Needs High-Speed Rail Despite Cost Overruns

13 hours ago

12 States to Sue Over DOGE Access to Government Payment Systems Containing Personal Data

Help continue the work that gets you the news that matters most.

Search

Send this to a friend