Inflation in December was even lower than first reported, the government says

The prices consumers pay in the marketplace rose at an even slower pace than originally reported, according to closely watched revisions the government released Friday.

Updates to the consumer price index showed that the broad basket of goods and services measured increased 0.2% on the month, less than the originally reported 0.3%, the Labor Department’s Bureau of Labor Statistics said.

While the change is only modest, it helped confirm that inflation was moderating as 2023 ended, giving more leeway to the Federal Reserve to start cutting interest rates later this year.

The revisions are done as a matter of course for the BLS, but garnered extra attention this year after the market reacted sharply to last year’s changes. Indications that inflation in 2022 rose more than anticipated drove Treasury yields higher and sparked worry from investors that the Fed might keep monetary policy more restrictive.

Fed Governor Christopher Waller, in particular, had called attention to the 2022 revisions, sparking market attention for the latest round.

Excluding food and energy, the so-called core CPI increased 0.3% for the month, the same as originally reported. Fed policymakers tend to focus more on core measures as they provide a better indication of long-run movements in inflation.

Also, the headline November reading was revised higher, up 0.2% versus the initial 0.1% estimate.

In aggregate, the revisions indicate that headline CPI accelerated at a 2.7% annualized rate in the fourth quarter, down 0.1 percentage point from the initially stated figures, according to Ian Shepherdson, chief economist at Pantheon Macroeconomics. Further out, the second-half revisions put CPI higher — by 0.003 percentage point, according to Goldman Sachs calculations.

The revisions amounted to “a damp squib,” said Paul Ashworth, chief North America economist at Capital…