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Investing.com -- Headline U.S. inflation is expected to have sped up marginally in December, while an annual underlying reading is seen slowing, as Federal Reserve officials search for signs of easing price gains before rolling out possible interest rate cuts this year.
Economists estimate that the year-on-year consumer price index (CPI) from the world's largest economy accelerated to 3.2% last month, up from 3.1% in November. Month-on-month, the pace is projected to increase to 0.2%.
But the rate of the so-called "core" measure, which strips out volatile items like food and energy, is tipped to drop to 3.8% annually, down from 4.0% in the prior month. On a monthly basis, core CPI is anticipated to match November's figure of 0.3%.
"[W]hile supply chain bottlenecks continue to ease and energy prices fall, overall pricing pressures remain relatively strong," analysts at ING said in a note on Thursday.
Fed policymakers will likely be closely watching the data, which could factor into how they approach rate reductions later in 2024. In a speech on Wednesday, New York Fed President John Williams argued it is still too soon to call for cuts because inflation is well above the bank's stated 2% target.
Williams' comments echoed recent sentiments from other rate-setters, who have attempted to temper soaring market enthusiasm for potential reductions early this year. This optimism, fueled by a surprisingly dovish Fed outlook last month, drove a rally in stocks in the final weeks of 2023 that has since lost some steam.
The Fed has lifted interest rates up to more than two-decade highs of 5.25% to 5.50% in a bid to defeat red-hot post-pandemic inflation. Price growth sharply abated over the final six months of 2023, although it remains uncertain if the central bank will manage to bring inflation down to 2% without sparking a meltdown in the wider economy.
U.S. stock futures were broadly higher on Thursday, with traders gearing up for the publication of the inflation data at 08:30 ET (13:30 GMT).
By 07:24 ET, S&P 500 futures had increased by 8 points or 0.2% and Nasdaq 100 futures had added 60 points or 0.4%. The Dow futures contract, meanwhile, had dipped by 25 points or 0.1%.