The Inflation Gyration: Energy prices are letting up

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Welcome back to day 522 of the inflation story.

The headline Consumer Price Index (CPI) rose 6.5% in December, down from a reading of +7.1% in November.

For the glass-half-full folks: This marks the 6th month in a row that annual headline CPI has dropped since the pace of price rises peaked in the middle of last year. Gas prices have returned towards “normal” and inflation in physical goods is dropping the quickest.

For the glass-half-empty folks: Core CPI, which strips out the prices of food and energy, making it a preferred measure of true inflation for some, stayed stubbornly high in December, rising +0.3% relative to November.

A rate-hikers guide to the galaxy

No one will have scrutinized the inflation figures closer than the decision-makers at the Federal Reserve. More hawkish members of the committee can now point to slowing inflation as a good argument to slow the pace of rate hikes, which have been among the fastest in history. Investors seemed cautiously optimistic, with stocks holding onto their modest gains from this week after the inflation numbers were released.

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