Inflation is Cooling but Will Not Reach the Fed’s Target Rate of 2% in 2024

image of 100 dollars and downward inflation arrow

The headline inflation reading was 3.4% for December 2023, showing an uptick from the previous month’s reading of 3.1% ( Core CPI, excluding volatile food and energy prices, rose 0.3% for the month and 3.9% from a year ago.

Shelter costs, which increased 6.2% y-o-y and 0.5% from the previous month, were one of the largest contributors to the rise in CPI. On an annual basis, food costs increased by 2.7% and 0.2% from the previous month.

inflation chart

Although inflation is not excessively high and has declined considerably from the highs seen in 2022, the slow progress in its decline indicates that achieving the Fed’s 2% target rate is not happening anytime soon. Persistent elevation in shelter inflation will likely prompt the Fed to maintain its current rates and push back any cuts. Veros’ forecasts anticipate inflation rate to average 2.9% by 2024 end.

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