US inflation outstripped forecasts for the year to December, hitting 3.4 per cent and dimming market expectations that interest rates will fall as soon as March.
Economists had expected a rise of 3.2 per cent, up from 3.1 per cent in November.
The core rate also came in higher than economists had hoped, in an apparent vindication of the US Federal Reserve’s caution over cutting rates from their 23-year-high.
Stock market futures dipped and Treasury yields rose following the data showing a headline 3.4 per cent annual rise in consumer prices.
The two-year Treasury yield, which moves with interest rate expectations, rose 0.05 percentage points from before the release of the data to 4.38 per cent.
In the futures market, traders slightly reduced expectations that the Fed would cut interest rates in March.
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Core consumer price inflation, which excludes food and energy costs, was 3.9 per cent for the year to December, slightly lower than the 4 per cent figure for November, according to the data published by the Bureau of Labor Statistics. But economists had expected 3.8 per cent.
The month-on-month core rate, a key measure of underlying inflationary pressures that the Fed watches closely, was unchanged at 0.3 per cent.
This is a developing story