Markets cheered a December inflation report that suggested underlying price pressures are easing, but the Federal Reserve still isn’t likely to cut interest rates anytime soon given President-elect Donald Trump’s plans for the economy.

The Labor Department's inflation report for the month of December showed that food and energy prices were the primary drivers of stubborn inflation experienced by consumers.

Progress on inflation should stall this year” as fiscal, immigration and trade policies shift, caution Bank of America economists.

Inflation probably picked up in late 2024, fueled by robust household spending amid a strong economy. A key gauge of inflation — the consumer price index — is expected to show Wednesday morning that prices rose by 2.9 percent in December from a year earlier, according to economists’ forecasts of data released by the Bureau of Labor Statistics.

Excluding the volatile food and energy categories, so-called core inflation declined to 3.2%, after remaining stuck at 3.3% for three months in a row.

U.S. producer prices rose less than expected in December as higher costs for goods were partially offset by stable services prices, suggesting inflation remained on a downward trend after progress had stalled in recent months.

US consumer inflation rose for a third straight month in December as energy prices jumped but a widely watched measure eased slightly, raising hopes that underlying inflation may be moderating.

Independent analyst Evan Lucas says the slowdown in US inflation caught the market “off guard” overnight. Core inflation in the US has softened to 3.2 per cent in December – beating expectations. “It’s the first time US inflation has actually gone backwards since they started cutting rates back in September,