Inflation inched above the two percent mark for the first time in 36 months in December, a long-awaited indicator that the U.S. economy has regained footing lost in the Great Recession. As the Federal Reserve prepares to meet in late January to discuss potential upcoming interest rate hikes, the new inflation numbers will most certainly factor into their decision making. The Fed gauges that inflation above two percent is a signal that the economy is robust enough to absorb increase in short-term rates.
The Consumer-Price Index, which tracks everyday expenses like gasoline and groceries, increased 2.1 percent on a yearly-basis, the largest jump since June 2014. Inflation has remained near historic lows for roughly four years.
With inflation having reached the target set by the Fed, an additional increase in the benchmark rate will be more easily justified. Officials approved a rate hike in December, the first in a year and only a second in nearly a decade.
Conforming no-point 30-year fixed rates are averaging 4.25 percent while the 15-year rates are near 3.375 percent.
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