CPI Inflation Rate Slides, But Core Prices Are Sticky; S&P 500 Futures Rise

The CPI inflation rate fell faster than expected in December. However, core inflation, which strips out food and energy, slowed in line with forecasts. S&P 500 futures rose moderately in early Thursday stock market action after release of the consumer price index.

The CPI inflation rate eased to 6.5% from 7.1% the prior month vs. Wall Street expectations of 6.6%. The consumer price index was fell 0.1% on the month vs. the expected flat reading.

The core CPI rose 0.3% vs. November levels, as expected. The annual core inflation rate eased to 5.7% from 6%. The core CPI inflation rate peaked at a 40-year-high 6.6% in September.

The Fed is likely to continue stepping down the pace of rate hikes to just a quarter-point with its next policy move on Feb. 1. The extent to which the Fed keeps hiking after that will depend less on the CPI than wage growth, which is key to the outlook for service-sector inflation. The good news for markets that sparked the latest S&P 500 rally attempt is that wage growth showed a surprising deceleration in December.