Core prices increased 0.3% on a monthly basis in December, after growing 0.2% in November, as overall prices rose by 6.5% year-over-year, matching investor expectations as energy and gas prices declined, according to Bureau of Labor Statistics (BLS) data released Thursday.

Overall, prices declined by 0.1% on a monthly basis in December, while “core prices,” a measure that discounts food and energy prices, climbed 5.7% year-over-year, matching investor expectations, the BLS reported in its monthly Consumer Price Index (CPI). After two back-to-back inflation readings that were lower than investor expectations in October and November, investors had hoped the Federal Reserve would further slow its pace of aggressive interest rate hikes designed to blunt inflation, MarketWatch reported.

Food prices were up 10.4% on a year-over-year basis in December, while energy prices continued to weigh on wallets, up 7.3% year-over-year despite plummeting 4.5% month-over-month, the BLS reported. The cost of shelter also outpaced inflation, growing by 7.5% year-over-year.

Expectations of a Fed “pivot” have been a point of contention between investors and asset managers, with major asset management firms like BlackRock and Fidelity warning customers in the past week that inflation and high interest rates are both likely to linger longer than markets currently seem to anticipate. Federal Reserve officials, for their part, have consistently made similar remarks, noting that they expect to hike interest rates past 5%, from their current range between 4% to 4.25%, according to MarketWatch.

*It’s U.S. #CPI Day! Here’s what to know:

-Dec. CPI Estimate: 6.5% Y/Y
-Nov. CPI: 7.1% Y/Y

-Dec. Core CPI Estimate: 5.7% Y/Y
-Nov. Core CPI: 6.0% Y/Y

-Time of Release: 8:30AM ET

*Source: @Investingcom
*Link: https://t.co/dBNNGi31bz$DIA $SPY $QQQ pic.twitter.com/KBIl99Cn5b

— Jesse Cohen (@JesseCohenInv) January 12, 2023

“Inflation won’t quite go down the way people expected,” JPMorgan Chase CEO Jamie Dimon said Tuesday, according to The Wall Street Journal. Dimon anticipates that the Fed might raise rates as high as 6% to control inflation.

Although overall inflation has cooled significantly from its peak of 9.1% in June, it remains well above the Fed’s target of 2%, according to the WSJ. Core prices fell on a yearly basis for the third month in a row since setting a 40-year high of 6.6% in September, but at 5.7% remain incredibly elevated as prices continue to climb month-over-month.

The Fed expects that elevated interest rates will reduce economic demand and eventually cool a stubbornly hot labor market, raising unemployment from its current rate of roughly 3.5% to roughly 4.6% by the end of the year. Some economists have argued that a hot labor market and rising wages have helped feed inflation by increasing Americans’ income.

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