WASHINGTON — U.S. inflation accelerated last month as prices for gas, eggs, and used cars rose, yet underlying price pressures also showed signs of easing, bolstering hopes that the Federal Reserve could still cut its key interest rate this year.

The consumer price index rose 2.9% in December from a year ago, Wednesday’s report from the Labor Department showed, up from 2.7% in November. It was the third straight increase after inflation fell to a 3 1/2 year low of 2.4% in September.

Yet excluding the volatile food and energy categories, so-called core inflation declined to 3.2% after remaining frozen at 3.3% for three months. Economists pay close attention to core prices because they typically provide a better guide of inflation’s future course.

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Mixed Picture for Consumers

The report presents a mixed picture, with consumers still grappling with high prices for essentials such as groceries, housing, and some services such as air fares. At the same time, increases in apartment rental prices are slowly easing and clothing costs barely rose last month. If core prices continue to match December’s pace, inflation should move closer to the Fed’s 2% target.

The report shows that core inflation “is on the downslope,” said Mike Skordeles, head of U.S. economics at Truist, a bank. “If the trends continue, the Fed might still end up cutting at some point.”

Some likely one-time price spikes pushed up overall inflation, with gas prices jumping 4.4% just in December. Prices at the pump have risen by much less since then, moving up 7 cents on Wednesday from last month to $3.09 a gallon.

Grocery Prices and Egg Costs Rise

Grocery prices had slowed for most of last year but began accelerating in the fall, rising 0.4% in September, 0.5% in November and 0.3% last month. Egg prices jumped 3.2% in December and are up 36.8% from a year ago. An outbreak of avian flu is decimating many chicken flocks, reducing egg supply.

On a monthly basis, consumer prices rose 0.4% in December, the biggest increase since last March. Core prices climbed just 0.2%, after four months of 0.3% increases, a positive sign that some price pressures could be cooling a bit.

The slowdown in core price increases was greeted with relief on Wall Street, with the Dow Jones industrial average surging nearly 700 points, or 1.6%, in early trading. Many economists and investors are worried that inflation has become stuck above the Fed’s 2% target after a steady decline in 2023 and for much of last year.

Such concerns have sent interest rates on Treasury securities higher, which has also pushed up borrowing costs for mortgages, cars, and credit cards, even as the Fed has cut its key rate.

Potential Impact of Trump Policies

The increase in overall consumer prices underscores that inflation remains sticky, even as the threat of potentially inflationary policies from the Trump administration, such as universal tariffs and mass deportations of unauthorized migrants, looms.

On Tuesday, Trump said that he would create the “External Revenue Service” to collect tariffs, suggesting he expects many duties to ultimately be imposed, even as he has also said he intends to use them as bargaining chips. During the campaign, he promised to impose up to 20% duties on all imports and as high as 60% tariffs on goods from China.

David Pennino, chief executive at LogicSource, a procurement outsourcing company, says that widespread tariffs could boost inflation.

Universal import taxes would raise costs for businesses by making laptop computers, packaging, and office furniture, among other items, more expensive, Pennino said. His firm, which manages procurement for about 40 companies, including TractorSupply, Titleist, and Lululemon, has calculated that universal tariffs could push up computer hardware prices by 20% to 30% and plastic packaging by 15% to 25%.

“I struggle to see how it wouldn’t affect the cost of goods sold, and therefore create an inflationary environment,” Pennino said.

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Local Business Perspectives

Ali Collier, who owns Main St Market in Glen Rock, Pennsylvania, a farmer’s market-style grocery store, said her egg supplier invested in a bigger flock last spring and hasn’t increased his prices so far, enabling Collier to avoid price hikes. That has attracted some customers to her store.

“We’ve had egg drama in the past,” she said, referring to previous price spikes caused by avian flu. “The more consistent I can be with my pricing, the better and more trustworthy people seem to find our store.”

While most of her produce, soaps, and other goods are locally sourced, she does import some apples, ginger, and packaging materials, and is worried about how tariffs would affect those prices. She can source more apples in the United States, but worries that tariffs will drive other firms to also buy more in the U.S., raising her costs.

Last week, minutes from the Fed’s December meeting showed that economists at the central bank expect inflation to remain level with 2024, pushed up a bit by higher tariffs. Wall Street expects the Fed to deliver just a single quarter-point cut this year, from its current level of 4.3%, according to futures prices.

Other borrowing costs remain high, in part because of higher inflation expectations and few rate cuts. Mortgage rates, which are strongly influenced by the yield on the 10-year Treasury note, rose for the fourth consecutive week to 6.9%, far above the pandemic-era lows of below 3%.

Earlier this month, several prominent economists, including former Federal Reserve Chair Ben Bernanke, agreed that tariffs will probably only have minor effects on inflation. The issue was discussed at the American Economic Association’s annual meeting in San Francisco.

Yet even an increase in inflation of just several tenths of a percentage point could be enough to affect the Fed’s decision-making, said Jason Furman, a top economic adviser during the Obama administration, who moderated a discussion at the conference.

“You are in a world where the Trump policies are more like tenths, than something cataclysmic,” he said Jan. 4. “But I think we’re also in a world where the direction of whether rates are staying the same, going down, or going up, depends on those tenths.”