Accordingly, the consumer price index (CPI) increased by 6.5% in December 2022 compared to the same period in 2021, the lowest increase since October 2021.
Meanwhile, on a monthly basis, the CPI actually fell 0.1% in December from November 2022 and was well below the peak of 9.1% in June 2022. This was the first time the CPI fell since May 2020.
"The December CPI report is welcome news after a very bad inflation run," said Bill Adams, chief economist at Comerica Bank.
"The gasoline index was by far the largest contributor to the monthly decline in prices," the Labor Department said.
Gasoline prices fell 12.5% in December 2022, according to data from the U.S. Energy Information Administration. Meanwhile, commodity prices, a major driver of inflation over the past year and a half, fell for a third straight month in December, driven by lower prices for products such as cars, computers and sporting goods. Improved supply chains and lower demand helped ease price pressure on goods. However, service prices continued to rise, partly due to rising wages amid a tight labor market.
New data may signal that the worst of the US consumer price hike may be over. However, inflation remains well above the Federal Reserve's 2% target.
"Controlling services inflation will be the Fed's biggest challenge this year," said Ryan Sweet, chief US economist at Oxford Economics.
As US households struggled with decades-high inflation last year, the Fed raised its benchmark lending rate at an unprecedented pace in hopes of cooling the world's largest economy.
In 2022, the FED raised interest rates by 425 basis points from 0% to 4.25% - 4.50%. This is the highest interest rate in the US since 2007./.
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