Inflation eases in December but still high for Fed

Inflation cooled a bit last month as prices for gas and used cars fell, a sign that stubbornly elevated cost pressures are slowly easing.

- BY CHRISTOPHER RUGABER

Consumer prices rose 0.3% in December from the prior month, the Labor Department said Tuesday, the same as in November. Excluding the volatile food and energy categories, core prices rose 0.2%, also matching November's figure. Increases at that pace, over time, would bring inflation closer to the Federal Reserve's target of 2%.

Many economists had expected inflation to jump last month as the government resumed normal data collection after the six-week shutdown in the fall, so the modest increases that matched the November figures came as a relief. The price of manufactured goods was flat in December, a sign that the impact of tariffs may be starting to fade.

"Distortions caused by the government shutdown have made the inflation data harder to interpret, but the recent run of figures suggests inflation has peaked," Michael Pearce, chief U.S. economist at Oxford Economics, wrote in a note to clients.

Signs that inflation is cooling could make it more likely that the Federal Reserve will reduce its key interest rate later this year, which could translate into lower borrowing costs for mortgages, auto loans and credit cards.