Consumer prices in the United States continue to slow down, as the Federal Reserve’s interest rate hike to the highest level in 15 years begins to take effect. The Consumer Price Index (CPI) for December showed a 6.5% increase in prices compared to last year and a 0.1% decrease from the previous month. The core CPI, which excludes volatile food and energy components, also rose 5.7% compared to the previous year and 0.3% from the previous month. These figures are in line with analysts’ predictions.

Housing prices continue to be the main factor in the CPI report, while other components saw a mix of increases and decreases, according to the Bureau of Labor Statistics. Despite the decrease in inflation, the cost of essential items for consumers remains high, well above the Federal Reserve’s long-term inflation target of 2%. A decrease in gas prices was the main contributor to last month’s decrease in the monthly reading, offsetting the increases in housing costs.

Inflation rose at a slower rate again in the final month of 2022, a welcome downtrend in consumer prices after the Federal Reserve raised interest rates to the highest level in 15 years.

The Consumer Price Index (CPI) for December showed a 6.5% rise in prices over last year and a 0.1% decrease over the prior month, government data showed Thursday, on par with consensus estimates compiled by Bloomberg.

On a “core” basis, which strips out the volatile food and energy components of the report, prices climbed 5.7% year-over-year and 0.3% over the prior month. The core CPI reading were also in-line with forecasts.

Policymakers monitor “core” inflation closely due to its nuanced look at key inputs like housing, while the headline CPI figure has moved largely in tandem with volatile energy prices over the last year.

Even as price pressures eased from the 9.1% peak of the current inflation cycle, last month’s reading marked the second-hottest December CPI print since 1981, topped only by 7.1% in December 2021.

Despite last month’s drop in inflation, the cost of essential items facing U.S. consumers remains stubbornly high and well above the Federal Reserve’s long-term inflation target of 2%.

Housing prices continued to be the dominant factor in the CPI report, while other components saw a mix of increases and declines, the Bureau of Labor Statistics said.

The shelter category of CPI — which accounts for 30% of overall CPI and 40% of the core reading — increased 0.8% over the month and 7.5% over the last year, comprising more than half of the

total core CPI increase. A sharp drop in gas prices was the main contributor to last month’s decrease in the monthly reading, more than offsetting increases in housing costs, the BLS said. Prices at the pump plunged 9.4% across December after a 2% jump in November.

Overall, the data showed a slowing trend in inflation, which is welcome news for policymakers as they continue to monitor the economy and make decisions on interest rates. However, the high cost of essential items for consumers remains a concern, and the housing market continues to drive inflation. It will be important to closely watch future CPI reports to see if this trend continues and if any further actions are needed to address inflation and maintain economic stability.