A sharp drop in energy prices, particularly for gasoline, is helping to alleviate cost-of-living pressures in the United States.
According to the US Labor Department, inflation in the United States was 6.5% in the year ending December 31, down from 7.1% in November.
This was the smallest increase in more than a year, and it was the sixth month in a row that the rate fell.
Some items, such as oranges and bananas, even saw price drops in December when compared to November.
Overall, prices fell 0.1% month on month, owing to a drop in gasoline prices.
However, some analysts cautioned that the price relief from energy was not spreading as quickly as hoped.
Clothing prices, for example, increased 0.5% from November to December and were up 2.9% year on year.
“Goods deflation isn’t spreading as quickly as we expected,” wrote Paul Alsworth, Capital Economics’ chief North America economist.
Authorities in the United States have been battling to stabilize prices, which skyrocketed in 2021 as the economy roared back to life following pandemic lockdowns and companies facing shortages and rising costs raised prices.
The Ukraine war, which disrupted food and energy supplies, exacerbated the problem, sending inflation to 9.1% in June, the highest rate in more than four decades.
Line chart depicting US inflation in December 2022 at 6.5%.
Last year, the US Federal Reserve responded by raising interest rates at the fastest rate in decades in an effort to return inflation to the 2% rate it considers healthy.
Last month, Federal Reserve Chairman Jerome Powell stated that the bank would begin to move less aggressively to see how the moves play out in the economy.