U.S. consumer prices increased in December, driven by higher rents and food costs as distortions from the government shutdown that had suppressed inflation in November unwound, Reuters reported. The data reinforced expectations that the Federal Reserve would keep interest rates unchanged this month.

The Labor Department’s Bureau of Labor Statistics (BLS) said the Consumer Price Index (CPI) rose 0.3 percent in December, with shelter costs, including rents, up 0.4 percent. Food prices increased 0.7 percent, the largest monthly gain since October 2022—and rose 3.1 percent year-on-year. Beef prices climbed 1.0 percent, steaks 3.1 percent, and year-on-year steak prices surged 17.8 percent. Coffee rose 1.9 percent, while egg prices fell 8.2 percent. Restaurant food costs increased 0.7 percent.

Energy prices rose 0.3 percent, as natural gas increased 4.4 percent, offsetting a 0.5 percent fall in gasoline. Electricity prices edged down 0.1 percent but were 6.7 percent higher year-on-year due to rising demand from data centers amid AI investment.

Excluding food and energy, core CPI rose 0.2 percent in December, with a 2.6 percent year-on-year gain, unchanged from November. Owners’ equivalent rent rose 0.3 percent, hotels 2.9 percent, airline fares 5.2 percent, apparel 0.6 percent, and healthcare 0.4 percent. Used cars fell 1.1 percent, household furnishings 0.5 percent, and wireless services 3.3 percent.

Economists noted lingering shutdown-related distortions in November’s data, which had suppressed reported inflation. High food and rent costs continue to affect household affordability. “Families may not closely track core inflation, but they see grocery prices and restaurant costs immediately,” said Sung Won Sohn, finance and economics professor at Loyola Marymount University.

The report showed moderate underlying inflation pressures, suggesting tariff pass-through to prices is slowing. Consumers and economists remain concerned over expensive food and rents, which influence wage negotiations and economic behavior.

President Trump has proposed measures to ease costs, including restricting institutional investors from buying single-family homes and directing the Federal Housing Finance Agency to purchase 200 billion US dollars of bonds issued by Fannie Mae and Freddie Mac to lower mortgage rates.

Following the report, U.S. stocks fell, Treasury yields declined, and the dollar rose against other currencies. Economists estimated shutdown distortions held the annual CPI down by at least 0.1 percentage point, and core inflation could accelerate in January with new price adjustments.

Based on CPI data, the core Personal Consumption Expenditures (PCE) price index likely rose 0.46 percent in December, translating to a 2.9 percent year-on-year increase. The Fed is expected to maintain its benchmark overnight rate at 3.50–3.75 percent at its January 27-28 meeting.