Consumer prices rose at the pace in December that economists were projecting, signaling the Federal Reserve is starting to make progress in its fight against historically high inflation.
What Happened: The consumer price index rose 6.5% in December, down from 7.1% in November, according to data the Labor Department reported on Thursday.
The December CPI reading was in line with average economist estimates of 6.5%.
Core inflation, which excludes volatile food and energy prices, was up 5.7% in December, in line with average economist estimates for a 5.7% gain.
The Labor Department said energy prices were down 4.5% last month, while food prices climbed 0.3%.
Why It Matters: The SPDR S&P 500 SPY is moving lower premarket Thursday as investors continue to assess what the Fed's next move will be at its Feb. 1 meeting. The Fed will be paying close attention to Thursday's release.
After stifling markets with four consecutive 0.75% rate hikes, the central bank opted for a less aggressive 0.5% hike at its last meeting.
In a press conference following the decision on rates, Fed Chair Jerome Powell reaffirmed the central bank's commitment to bringing inflation back down to its 2% goal.
Although he acknowledged that recent data was encouraging, he indicated that it was not enough.
"The inflation data received so far from October and November show a welcome reduction in the monthly pace of price increases, but it will take substantially more evidence to get confidence that inflation is on a sustained downward path," Powell said at the time.
Earlier this month, the Labor Department said the U.S. economy added 223,000 jobs in December, exceeding economist estimates of 200,000. November meeting minutes, which were released last week, show that inflation remains a top priority for the Fed.
Kansas City Federal Reserve President Esther George also sounded increasingly hawkish last week when she told CNBC she expects rates to go higher than she previously anticipated and to remain elevated well into 2024.
The Fed's next meeting is set to kick off on Jan. 31. It's unclear if Thursday's improving data will be enough to knock the central bank off its pace of rate hikes.
Powell has repeatedly said the Fed will "stay the course until the job is done."
See Also: Fed Officials Say Thursday's Inflation Data Release To Help Decide On Pace Of Rate Hikes
SPY Price Action: The SPY Is down 0.15% at $394.93 Thursday morning, according to data from Benzinga Pro.
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