Consumer prices were up 2.9 percent from a year earlier in December, up slightly from the month prior.

Some analysts consider the recent inflation data revealed by the Bureau of Labor Statistics as highly significant, possibly shaping the decisions of the Federal Reserve in 2025.

This, in turn, will affect Americans’ credit card rates, car loans, 401(K) retirement accounts and mortgages.

Prices increased 0.4 percent month-on-month, which was slightly higher than economists’ predictions, after rising by 0.3 percent in November.

Following a decline to 2.4 percent in September, marking a three and a half-year low, the annual inflation rate has now increased for the third consecutive time, reaching 2.7 percent in November.

The new data suggests the last hurdle on squashing inflation is proving to be a challenge for the Fed.

Currently, there is a strong market expectation of over 97 percent probability that the central bank will maintain the current interest rates at the upcoming meeting. Nonetheless, a few analysts anticipate potential interest rate reductions later in the year.

Stock market futures surged after the release of the data, as it showed core inflation had slowed unexpectedly last month. 

Consumer prices were up 2.9 percent from a year earlier in December, up slightly from the month prior

Futures tied to the Dow Jones Industrial Average rose 1.5 percent, while S&P 500 futures climbed 1.5 percent. 

The core inflation rate, which excludes the volatile food and energy indexes, rose 3.2 percent, which was down from the month prior and better than the 3.3 percent forecast. 

Rising stock market returns are good news for Americans invested in 401(K) and IRA retirement plans, which tend to be invested in the major market indices. 

That means when Wall Street makes gains, so too do their savings. 

Seema Shah, chief global strategist at Principal Asset Management, said that the Fed could cut in March if inflation data stays on track.

‘Today’s CPI should provide a boost to markets, relieving some of the anxiety that the US is at the beginning stages of a second inflation wave. 

‘For the Fed, this is certainly not enough to prompt a January cut. But, if today’s print were accompanied by another soft CPI print next month plus a weakening in payrolls, then a March rate cut may even be back on the table.’

Stock market futures surged after the release of the data, as it showed core inflation had slowed unexpectedly last month

Some traders expected Wednesday to be the busiest CPI day since March 2023, according to Bloomberg. 

‘All eyes are now on Wednesday’s CPI report, which may be the most important inflation reading in recent memory, as it will fuel the market’s Fed-obsessed sentiment,’ Chris Brigati at SWBC said Tuesday. 

Consumers are still feeling lingering price pressures in key areas including energy and food.

Energy costs accounted for over 40 percent of the monthly price increases, with the gas index up 4.4 percent over December. 

Food prices also remained elevated, with everyday items including meat, eggs, cereals and bakery products all rising on a monthly basis.

Housing, airline fares, used cars and trucks, new vehicles and car insurance all increased in price in December, according to the Bureau of Labor Statistics data.