The December 2024 CPI report showed inflation was still running above the Federal Reserve’s 2% longer-run goal, but the headline and core measures told different stories depending on the time period. The release was relevant to expectations for Fed rate cuts in 2025; it did not dictate the Fed’s next move or establish how much markets changed their forecasts.
What the December CPI report showed
The U.S. Bureau of Labor Statistics released the December 2024 Consumer Price Index on January 15, 2025. All-items CPI was up 2.9% from a year earlier, while CPI excluding food and energy—often called core CPI—was up 3.2%. On a seasonally adjusted monthly basis, all-items CPI rose 0.4% and core CPI rose 0.2%. BLS’s December 2024 CPI release reports these figures.
| Measure | Change over 12 months | Seasonally adjusted change from November |
|---|---|---|
| All-items CPI | 2.9% | 0.4% |
| CPI excluding food and energy (core) | 3.2% | 0.2% |
The comparison matters: the year-over-year core rate was higher than headline inflation, but the monthly core increase was smaller than the monthly all-items increase. These are different measures over different periods, not contradictory readings.
Why inflation data could affect expected rate cuts
Investors and analysts use incoming inflation data to reassess whether price pressures are easing quickly enough for the Fed to lower its policy rate. A hotter-than-expected report can lead some market participants to anticipate fewer or later cuts; a cooler report can support the opposite view. That is a possible response, not a mechanical rule: one CPI release neither determines market pricing nor compels a Fed decision.
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Jason Schenker’s January 12, 2025 Forbes analysis framed the pending report as a risk to expectations for 2025 cuts, given the article’s account of solid labor-market data and concern about persistent inflation. It was a conditional forecast written before the January 15 release—not a claim that markets would certainly reduce their expectations. The article also described scenarios in which later base effects could ease year-over-year inflation and markets might ultimately expect more cuts. Read Schenker’s January 12 analysis.
How the CPI result relates to the Fed’s own projections
In its December 18, 2024 Summary of Economic Projections, the Fed reported a median participant assessment of 3.9% for the appropriate federal funds rate at the end of 2025. The comparable median in September was 4.4%. The December projection therefore indicated a higher projected year-end rate—and fewer implied reductions from the then-current level—than the September median, but it was not a promise or a market forecast.
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The projections are individual Federal Open Market Committee participants’ assessments, conditional on their views of appropriate policy and economic conditions. They are distinct from futures-implied probabilities or other measures of what markets expect. The Federal Reserve’s December 2024 projections also include estimates for output, unemployment and inflation.
Keep CPI separate from the Fed’s inflation goal
CPI is produced by the Bureau of Labor Statistics. The Fed’s longer-run 2% inflation objective is expressed in terms of the Personal Consumption Expenditures price index, or PCE inflation. CPI and PCE measure inflation differently, so the December CPI rates should not be read as direct measurements of the Fed’s target. The Fed considers a range of information when setting policy.
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- It establishes: December 2024 CPI inflation was 2.9% year over year for all items and 3.2% for core; monthly seasonally adjusted increases were 0.4% and 0.2%, respectively.
- It does not establish: how much markets changed their expected rate path in response. The available figures do not quantify a before-and-after move in market pricing or asset prices.
- It does not establish: what the Fed would decide at a subsequent meeting. A CPI release is one input, and Fed projections are not commitments.
The original forecast concerned the outlook for 2025 and is now historical. It should not be used as current rate-cut guidance.
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