Gas Prices Rise Over 4 Percent, Creating Most Of Recent Inflation

Gas prices saw a notable increase in December 2024, with the gasoline index rising 4.4% and accounting for most of the inflation for the period.

The Consumer Price Index (CPI) by the U.S. Bureau of Labor Statistics measures changes in the price level of products and services, which makes it a key indicator of inflation at the producer level.

The rise in gas prices contributed to the overall 2.6% climb in the energy index, which accounted for over 40% of the overall monthly rise.

The CPI rose 0.4% in December 2023, marking a 2.9% increase over the last 12 months. While gas prices spiked, food prices also increased by 0.3%.

The CPI for items excluding food and energy rose 0.2%, which was driven by the cost for shelter, medical care, and used vehicle prices.

The CPI and interest rates set by the Federal Reserve are closely linked through their role in subduing inflation.

If the CPI shows low or stable inflation, the Federal Reserve might lower interest rates to encourage borrowing and spending in an effort to stimulate economic growth. When inflation rises too quickly, the Fed may intervene by raising interest rates.

It seems that two more interest rate cuts are likely back on the table for 2025 after a positive December report on inflation. The Fed had projected only two cuts in 2025.