According to the CPI, consumer prices will rise faster in 2019 than in eight years, but inflation remains subdued

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<pre><pre>According to the CPI, consumer prices will rise faster in 2019 than in eight years, but inflation remains subdued

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Consumer prices rose at the fastest pace since 2019, with rents, gas, and medical care accounting for most of the increase. Food prices have barely risen in the past year.

The payment: Higher gasoline, health care and rental prices in December led to a renewed increase in the cost of living, making up for the largest annual inflation increase in eight years. Overall, however, price pressure remained largely subdued.

The consumer price index rose 0.2% last month, the government said on Tuesday. Economists surveyed by MarketWatch had forecast an increase of 0.3%.

The increase in the cost of living in the last 12 months rose by a few ticks to 2.3%, the highest level since October 2018.


Consumer inflation was at 2.3% in 2019, the highest since an increase of 3% in 2011.

Nevertheless, inflation is still quite low by historical standards. Most price hikes in the past year have focused on a few areas, and other measures suggest that US inflation will rise less than 2% per year.

The Federal Reserve fears that inflation will fall even further than it is when prices continue to rise.

Read: Where were the new jobs in 2019 – and how much did they pay?

What happened: The gasoline costs at the pump decreased in December, but not as much as usual. As a result, the government's CPI measurement showed a 2.8% rise in gas prices.

Food prices rose slightly by 0.2% last month. However, the cost of eating increases much faster than usual than buying groceries and eating at home.

It was more worrying that health care costs continued to rise. Medical costs rose 0.6% in December, led by higher prescription drug prices.

Healthcare costs have increased 4.6% in the past 12 months, the largest increase since mid-2016.

Rental, clothing and car insurance prices also rose last month. Prices for new cars and trucks rose for the first time in six months.

The prices of used vehicles and airfares fell.

Adjusted for inflation, hourly wages fell by 0.1%. They hardly increased by 0.7% in the past year.

Another closely watched measure of inflation using food and energy rose 0.1% last month. The annual increase in the so-called core rate remained unchanged at 2.3%.

Big picture: Despite a recent surge in the consumer price index, inflation in the United States has remained surprisingly low for decades despite the most tense job market.

A similar measure of wholesale prices does not show that inflation is bubbling in the economy. The Fed's preferred PCE pricing tool to measure inflation is significantly lower than the CPI – it only rose 1.5% in the twelve months to November.

If inflation remains relatively cheap, it will keep the Fed from raising interest rates in 2020. Low interest rates should help the economy continue to expand for a record year in a row.

Read: Unemployment claims fall to 214,000 for the fourth week in a row, almost to the lowest after the recession

Market reaction: The Dow Jones Industrial Average

DJIA, -0.01%

and S & P 500

SPX, -0.16%

should open little changed on Tuesday.

The 10-year return on the treasury

TMUBMUSD10Y, -0.80%

was almost unchanged at 1.84%.