Inflation jumped in December, complicating Fed aim of interest rate cuts

Consumer prices rose 3.4% in December compared to a year ago, accelerating markedly from the previous month and defying a smooth path down to normal levels, a report from the Bureau of Labor Statistics released on Thursday showed.

The Federal Reserve stands poised to dial back its inflation fight by cutting interest rates this year, but the latest inflation data could complicate those plans.

Interest rate cuts would ease borrowing payments for everything from credit cards to mortgages, but they risk stoking consumer demand and driving up inflation.

Prices last month rose faster than economists expected. The 3.4% rise of prices in December compared to a year ago sits more than a percentage point above the Fed’s target rate.

The price increases last month owed primarily to a rise in housing and energy costs, the U.S. Bureau of Labor Statistics said. Gas prices increased in December compared to a month prior, after having fallen considerably in November, the data showed.