December inflation expected to ease to 6.7%, Philly Fed’s Nowcast shows

The U.S. annual inflation is expected to ease further in December.

According to the Federal Reserve Bank of Cleveland, the Nowcast model suggests the consumer price index slowed to 6.7 percent in December, which would be down from 7.1 percent in November.

The core inflation rate, which eliminates the volatile energy and food sectors, likely stalled at just 5.9 percent this month.

Does this mean the Federal Reserve should continue raising interest rates?

The solution should have been to raise interest rates once the U.S. economy started reopening after the first wave of the coronavirus pandemic rather than waiting for inflation to explode.

The other step should have been to frontload these rate hikes rather than 75 basis points and 50 basis points there.

But that is a discussion for another day.

So far, the Eccles Building is convinced that it needs to keep raising the benchmark fed funds rate throughout 2023 until it is certain the inflation monster has been defeated.