December 2025 Inflation Report: What Rising Prices Mean for Your Wallet and Interest Rates

Diccon Hyatt is a seasoned financial and economic journalist who has extensively covered the pandemic economy through clear, accessible reporting. Over the past two years, he has authored hundreds of articles simplifying complex financial topics and highlighting their effects on personal finances and markets. His experience includes work at U.S. 1, Community News Service, and the Middletown Transcript.

Key Insights

• Inflation likely increased in December 2024, signaling a pause in efforts to curb rising prices.
• Despite declines throughout most of last year, inflation remains above the Federal Reserve's 2% annual target.
• Concerns about inflation have intensified amid proposals for tariffs on imported goods by the incoming administration.

According to economists surveyed by Dow Jones Newswires and The Wall Street Journal, December's Consumer Price Index (CPI) is expected to show a 2.9% increase over the previous 12 months. This marks the third consecutive month of rising inflation, reaching levels not seen since July.

Higher food and energy prices likely contributed to the CPI growth, suggesting the earlier easing of inflation pressures—thanks to improvements in supply chains disrupted by COVID-19—has slowed.

"Although we don't believe inflation is reversing, progress against it appears stalled due to fading supply chain benefits and new challenges from trade policies," stated economists Sarah House and Aubrey Woessner of Wells Fargo Securities.

Potential Positive Signs in Inflation Details

There is a silver lining in the report's finer details. Core inflation, which excludes volatile food and energy prices, is forecasted to slow to a 0.2% monthly increase in December, down from 0.3% in previous months.

Core inflation is considered a more stable gauge of inflation trends since food and energy prices can fluctuate due to external factors like weather rather than economic conditions.

Additionally, the Producer Price Index (PPI) for wholesale goods rose only 0.2% in December—half of the expected 0.4% increase—according to a related report. While wholesale prices don’t always directly translate to consumer prices, this moderation is a hopeful indicator.

"The lower-than-expected PPI reading is encouraging, even if it doesn’t immediately impact consumer prices," commented Charlie Ripley, senior investment strategist at Allianz Investment Management.

Implications for Federal Reserve Interest Rate Policy

If December's inflation projections hold true, inflation will continue to challenge the Federal Reserve’s dual mandate of controlling inflation without triggering unemployment spikes.

Persistent inflation above the 2% target complicates monetary policy decisions, potentially prompting the Fed to maintain higher interest rates for an extended period.

Public concern over inflation is rising as well, which may affect consumer spending habits and further influence inflation dynamics.

Economist David Seif of Nomura notes, "Growing inflation fears, combined with potential new tariffs under the current administration, increase the likelihood of a more hawkish Federal Reserve stance, keeping rates elevated longer."

Update, January 14, 2025: Included data from the recent Producer Price Index report. Originally published January 13, 2025.

Have a tip for our reporters? Email us at tips@investopedia.com

Discover engaging topics and analytical content in Economic News as of 10-09-2024. The article titled " December 2025 Inflation Report: What Rising Prices Mean for Your Wallet and Interest Rates " provides new insights and practical guidance in the Economic News field. Each topic is meticulously analyzed to deliver actionable information to readers.

The topic " December 2025 Inflation Report: What Rising Prices Mean for Your Wallet and Interest Rates " helps you make smarter decisions within the Economic News category. All topics on our website are unique and offer valuable content for our audience.