The U.S. December CPI report came on the softer side. Here are the highlights:

• Month-over-Month Headline CPI
  • Headline CPI m/m came at -0.4% versus -0.3% expected
  • Gasoline index declined by -9.4% and food index rose by +0.3% so did the index for natural gas and electricity
• Month-over-Month Core CPI (excluding food and energy)
  • The m/m Core CPI (excluding food and energy) was 0.0% compared to forecast of +0.1%. It is the second time that it did not rise since 2010
  • Shelter index and medical care indexes rose with medical care posting the biggest increase since August 2013; But indexes for apparel, airlines fares, used cars and trucks, household furnishings and operations and new cars declined
•  Year-over-Year Headline CPI
  • Over the last 12 months headline CPI increased 0.8% before seasonal adjustment versus the expectation of 0.7%
  • Prior month y/y Core CPI was 1.3%
  • Energy index declined by -10.6%; the food index gained by +3.4%, its largest since February 2012;
• Year-over-Year Core CPI
  • Core increased by 1.6%, its smallest change since February 2014

Here is month-over-month CPI change:

Here is month-over-month Core CPI change:

Here is year-over-year CPI change:

Here is month-over-monthCore CPI change:
It doesn’t look like that CPI is moving towards Fed’ target of 2%. Here is what Narayana Kocherlakota, president of Federal Reserve Bank of Minneapolis, said in his outlook for the US economy and monetary policy in 2015:

• Says again that he doesn’t favour raising rates in 2015
• Will take a few years before inflation back to 2%
• Federal Reserve underperformed on dual mandate for 3 years
• Lack of Federal Reserve response is further credibility risk
• Federal Reserve hasn’t acted on inflation expectations drop
• Federal Reserve eroding credibility by missing inflation goal