Economists are hoping that a tightening labor market, rising commodity prices and a weak dollar will lift inflation toward the Federal Reserve’s 2 percent target this year.
The U.S. central bank’s preferred inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, has undershot its target since May 2012.
The U.S. central bank is forecasting three rate hikes this year. It increased borrowing costs three times in 2017.
Supporting the rise in underlying inflation pressures last month, rents increased 0.4 percent. Owners’ equivalent rent of primary residence climbed 0.3 percent after gaining 0.2 percent in November. The cost of medical care increased 0.3 percent, with prices for prescription medication surging 1.0 percent after rising 0.6 percent in November. The cost of both hospital and doctor visits increased 0.3 percent.
Households also paid more for new motor vehicles, which rose 0.6 percent in price last month, the biggest gain since January. The cost of motor vehicle insurance increased 0.6 percent. Apparel prices, however, fell 0.5 percent.
Cheaper gasoline prices limited the increase in the overall CPI to 0.1 percent in December after climbing 0.4 percent in November. That lowered the year-on-year increase in the CPI to 2.1 percent from 2.2 percent in November.
Last month, gasoline prices fell 2.7 percent after rebounding 7.3 percent in November. Food prices rose 0.2 percent after being unchanged for two straight months.