Inflation eased in December as core consumer prices rose at the slowest annual rate since March 2021. The Consumer Price Index (CPI) showed a 0.2% increase in consumer prices over the previous month and a 2.6% increase over the previous year on a “core” basis.

The 2.6% increase in “core” CPI matches the rise reported in November and equals the slowest pace of annual inflation since March 2021. On a headline basis, consumer prices rose 0.3% over the prior month and 2.7% over the prior year, meeting economists’ expectations.

Inflation has remained above the Federal Reserve’s 2% target but has drifted downward over the past year. Core prices in December showed a downside surprise, suggesting underlying inflation pressures have genuinely moderated in recent months.

Following the December CPI report, markets are putting 95% odds on the Fed keeping rates unchanged at the conclusion of its Jan. 27-28 meeting. This comes after a report showed inflation pressures on household food budgets remain notable, with food prices rising 0.7% in December.

Price increases were seen in all major grocery store food groups except meat, which includes fish, eggs, and poultry. Lower core consumer prices were driven by drops in used car and truck prices, as well as airline fares, contributing to an overall 0.5% drop in transportation services prices last month.

Read more at Yahoo Finance: Inflation eases in December, core consumer prices rise at slowest pace since March 2021, CPI report shows