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Consumer prices experienced their largest month-over-month decrease in December since April 2020 as inflation experienced its third month below an 8% annual growth rate since February 2022. December marked the sixth consecutive month of a deceleration in the pace of growth of inflation.

The Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) fell by 0.1% in December on a seasonally adjusted basis, following an increase of 0.1% in November.

The shelter index (housing inflation) continued to rise at an accelerated pace and was the largest contributor to the total increase. Shelter inflation will primarily be cooled in the future via additional housing supply. While inflation appears to have peaked and continues to slow, inflation in core service (excluding shelter) has not begun to ease. However, real-time data from private data providers indicate that rent growth is cooling, and this is not yet reflected in the CPI data.

The index for shelter, which makes up more than 40% of the “core” CPI, rose by 0.8% in December, following an increase of 0.6% in November. Both the indexes for owners’ equivalent rent (OER) and rent of primary residence (RPR) increased by 0.8% over the month. Monthly increases in OER have averaged 0.7% over the last three months. These gains have been the largest contributors to headline inflation in recent months.

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