Despite the uptick in overall inflation, underlying price pressures are showing signs of easing, complicating the Fed's goal of achieving a 2% inflation target.

Market expectations indicate that no interest rate cuts are likely during the Fed's upcoming meeting at the end of January 2025.

Consumer inflation expectations surged in January due to concerns over rising prices, particularly related to potential tariffs.

The increase in consumer prices was primarily driven by a 4.3% rise in energy costs in December, despite a year-over-year decline in energy prices.

December's inflation data slightly exceeded economists' expectations, who had predicted a monthly growth of 0.3%.

The Consumer Price Index (CPI) rose by 2.9% over the year ending in December 2024, reflecting a slight increase from the 2.7% rise recorded in November.

These inflation figures align with the Federal Reserve's expectations, suggesting fewer interest rate cuts may occur in 2025.

The incoming administration of President-elect Donald Trump has pledged tax cuts, which could further stimulate the economy.

U.S. stock markets experienced a significant rally, with the S&P 500 rising 1.83%, attributed to lower-than-expected inflation and easing Treasury yields.

Core inflation, which excludes food and energy prices, dipped by a tenth of a percentage point to 3.2% compared to the same period last year.

The recent CPI report has eased concerns about further interest rate hikes by the Fed, as core inflation figures were more favorable than anticipated.

Bond yields fell in response to the inflation report, with the benchmark yield decreasing by 8.4 basis points to 4.704%.