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The December CPI report shows that some prices are falling more than expected while the cost of other goods and services continues to rise.

However, today's release was enough to satisfy investors.

The S&P 500 and Nasdaq Composite were trading 1.8% and 2.3% higher, respectively, at 2pm EST on Wednesday. The mid-week rally helped reduce losses incurred earlier in the week. The Nasdaq Composite has now been flat over the past five trading days, while the S&P 500 has moved into the green, now up 0.5% over that time.

Prices rose 0.4% during the month and 2.9% over the year, close to expected readings of 0.3% and 2.9%, respectively. Despite this, the core CPI, which excludes food and energy prices, slowed to 3.2% in the 12 months to December, just below analysts' expectations of 3.3%.

The report had little impact on interest rate expectations, with federal funds futures markets still calling for a 97% chance for committee members to keep interest rates steady later this month.

However, the December reading shows that the central bank has made some progress in moving inflation back to its 2% target, and investors were thrilled.

Analysts say we are looking to the future Lowering interest rates in 2025 Maybe still in the cards, but not a lot of them.

“The key question now is whether the FOMC ‘skip’ will turn into a longer ‘pause’,” said Michael Brown, chief research strategist at Pepperstone. “The risks surrounding the policy outlook this year are much more biased than those seen last year, with renewed hawkish risks reintroduced to the policy path.”

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