US inflation fell for six straight months in December, according to a new federal report, with the headline rate coming in at 6.5% from the same time last year, down from 7.1% in November.
The Labor Department on Thursday released its summary of the consumer price index for December, noting that the 12-month inflation rate was at its lowest since October 2021 and average prices for goods and services fell 0.1% from November to December, the first monthly decline since May 2020.
A sharp drop in gasoline prices contributed to this decline, although average food and shelter costs rose from December. Average gas costs across the country fell 9.4% in December from November, while groceries rose 0.3% and housing costs rose 0.8%. In the same period last year, food prices increased by 10.4% and accommodation costs were 7.5% compared to December 2021.
Utah was among the Mountain West states that recorded national-leading regional inflation rates for much of 2022, and that distinction continued in December with territory inflation at 7.4%, the highest in the country.
Will the Fed hold back on raising rates when inflation is trending down?
The Federal Reserve has waged a year-long battle against soaring prices for goods and services, embarking on the most aggressive series of rate hikes in decades to cool the sweltering economy.
The rate hikes are aimed at raising the cost of debt for businesses and consumers, which in theory should reduce spending levels and overall economic activity, a shift in dynamics that normally lowers inflation rates.
But consumer spending remained resilient and the US job market continued to run hot, with vacancies far in excess of the number of workers available to fill them.
The Fed Board is expected to raise its funds rate again when it concludes its next meeting on February 1st. But if inflation eases further, the monetary policy body could suspend rate hikes thereafter, some economists say, or just implement an additional hike in March and then pause.
According to The Associated Press, futures prices show investors expect the Fed to cut rates by the end of the year, despite December meeting minutes noting that none of the 19 policymakers plan to cut rates this year.
“If actual inflation is trending down, the Fed can feel more reassured that they’ve landed the economy in a good place,” Daleep Singh, chief global economist at PGIM Fixed Income and a former Fed staffer, told `. Singh expects the Fed to hike interest rates by a quarter point at each of its next two meetings and then stop at just below 5%.
What’s in store for Utah’s economy in 2023?
A Utah Economic Council report released Thursday predicted that Utah’s economy could take one of three paths in the coming year — continue moderate GDP growth of 2% to 4%, slow growth to 0% to 2%, or into one moderate recession the state’s GDP could shrink by around minus 1%.
So why did the Business Council, a collaboration of the University of Utah’s David Eccles School of Business and the Governor’s Office of Planning and Budget, come up with a piñata forecast for the coming year?
Current economic conditions have been roiled by a number of exceptional functional and financial circumstances and have therefore never had to be factored into economic forecasts. A global public health crisis, subsequent widespread disruptions to product supply chains, seismic shifts in consumer behavior, and government-backed cash like individual stimulus checks and massive corporate subsidies have blown up previous models when it comes to guessing what next comes.
“The post-pandemic economy has transformed many traditional economic relationships,” the report said. “These economic transformations make accurate predictions difficult, as it is unclear if or when old patterns will return, or if new arrangements will chart a different economic course.”
The key takeaway from the report, which was presented to Utah Gov. Spencer Cox at an economic summit on Thursday, was a simple message that applies to budget policymakers at all levels — be prepared for anything.
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