Egg prices surge as US inflation picks up

A jump in energy and food prices hit the US last month, as progress stabilising prices remained elusive.

On average, prices in December were up 2.9% compared with a year earlier, up from 2.7% in November, the Labor Department said.

Energy prices accounted for more than 40% of the rise in inflation last month, according to the monthly report. It also showed egg prices shot up more than 36% compared with 2023, as a bout of bird flu hit supply and led to shortages.

But prices for other items rose by less than expected over the month, calming market fears that the US central bank might have to act more aggressively to stabilise prices.

So-called core inflation – which strips out often bumpy food and energy prices – was up just 3.2% from December 2023 and just 0.2% from November, rising less than analysts had expected.

Economists say that metric is a better indicator of underlying trends.

Seema Shah, chief global strategist at Principal Asset Management, said the latest figures should relieve “some of the anxiety that the US is at the beginning stages of a second inflation wave” but warned it was unlikely to keep the jitters at bay for long.

“Perhaps the key takeaway is that markets are likely to be whipsawed over the next few data releases as investors seek a narrative that they can be comfortable with for more than just a few days at a time.”

Inflation, the rate of price increases, has come down significantly in the US since 2022, when it shot past 9%.

Investors had been expecting the Federal Reserve, which had hiked rates to the highest levels in more than two decades to fight the problem, to cut rates this year as a result.

But further progress has been limited in recent months. Combined with a string of strong economic data, it has raised doubts about that plan.

Investors are also nervous that plans by President-elect Donald Trump for tariffs, mass migrant deportations and tax cuts could put upward pressure on prices.

The Fed is widely expected to keep its key rate, which now stands at about 4.3%, unchanged at its meeting this month.