US Inflation Cools Modestly in December Amid Trump Fed Tensions and Credit Card Rate Cap Push

December CPI Shows Slight Cooling

Consumer prices rose 0.3% in December from November, matching the prior month's increase. Core prices, excluding food and energy, also rose 0.2%, signaling cost pressures are easing slowly.[3]

Gas and used car prices fell, contributing to the modest inflation trend. Economists note this pace could align annual inflation closer to the Federal Reserve's 2% target over time.[3]

Government Shutdown Impact Fades

The data follows a six-week government shutdown that disrupted price collection in October and raised doubts about November's figures. December's results, with resumed normal collection, relieved markets expecting a sharper rise.[3]

Manufactured goods prices stayed flat, hinting that tariff effects may be waning. Headline inflation hit 2.7% annually in November, down from 3.0% in September.[1][3]

Trump Escalates Pressure on Federal Reserve

President Trump proposed capping credit card interest rates at 10% for one year, threatening legal action against issuers like Visa and Mastercard if unmet by January 20. Stocks of American Express, Visa, and Mastercard fell in response.[5]

Trump criticized the Fed for not cutting rates more aggressively, aiming to lower mortgage and borrowing costs. New York Fed President John Williams countered that tariffs added about 0.5% to inflation but underlying trends remain favorable.[3][5]

Fed Officials Weigh In on Policy

Remarks from Richmond Fed President Thomas Barkin and New York Fed President John Williams highlighted labor market dynamics and inflation outlook. Investors watched for hints on 2026 rate cuts, not expected until June at earliest.[1][2]

Williams anticipates inflation peaking in early 2026 before declining toward 2% by 2027. Fed Chair Powell noted tariffs' inflationary impact will subside after Q1.[3][4]

Upcoming Economic Data in Focus

• US retail sales, industrial production, and producer prices due this week.[1]
• Canada housing starts and Germany/Italy final inflation figures on Friday.[1]
• S&P Global Investment Manager Index survey reflects equity market sentiment Tuesday.[1]

Markets remain on edge with the 'Sell America' trade resurfacing amid Trump-Fed clashes. Soft jobs growth and improved consumer optimism add to the mix.[5][6]

Broader Market Reactions

Wall Street showed caution, with Citigroup, Visa, and Mastercard declining. Geopolitical tensions and soft US jobs data from recent reports heightened volatility.[5][6]

Trump also signaled inclination to exclude Exxon from Venezuela-related measures, amid ongoing policy shifts.[5]