The Consumer Price Index (CPI) accelerated 6.5% year-over-year in the final month of last year, slowing down significantly from the 9.1% high in June. While inflation is cooling down, it is still way above the Fed’s 2% target. Therefore, the Fed is still determined to raise rates this year, which will likely tip the economy into a mild recession.
Moreover, the economy is slowing, following 2.9% and 3.2% growth in the fourth and third quarters of 2022, respectively. Retail spending and industrial production weakened in December. Retail sales declined by 1.1% in December, the largest monthly decline since December 2021. Also, industrial production fell 0.7%, while manufacturing output dropped 1.3% amid widespread declines across the sector.
