In December 2024, the consumer inflation rate in the United States increased to 2.9% year-on-year. This figure aligns with market expectations and indicates a gradual rise in prices compared to previous months. The main drivers of inflation include rising energy costs, housing expenses, and food prices, which comprise a significant portion of the American consumer basket.
Financial Market Reaction
The news of rising inflation immediately impacted global financial markets. The Dollar Index (DXY), which reflects the value of the US currency against a basket of other major currencies, sharply declined. This led to increased interest in assets traditionally considered inflation hedges.
Gold prices, historically seen as a "safe haven" during periods of economic instability, jumped 2.5% in a day, reaching record highs over the past six months. At the time of writing, gold was priced at $2,726.56 per troy ounce. Bitcoin, a digital currency often viewed as a store of value, rose by 4.8%, reaching $102,769. During the day, the cryptocurrency peaked at $109,299 and dropped to a low of $99,539.
Causes and Consequences
Analysts point out that the rise in inflation is driven by a combination of factors:
- Rising energy prices. Demand for oil and gas remains high, particularly during the winter season.
- Food inflation. Weather conditions and supply chain disruptions have affected the prices of essential food products.
- Increased housing costs. The US real estate market continues to show high growth rates.
The rise in inflation may prompt the Federal Reserve (Fed) to refrain from cutting interest rates in the short term. This could significantly impact loans, mortgages, and business investments.
What to Expect Next?
Experts are divided on the future trajectory of inflation. Some believe that the Fed’s measures to curb inflation will gradually take effect in the first half of 2025. Others argue that structural factors, such as high energy costs and supply chain tensions, may sustain elevated prices for an extended period.
For American consumers and investors, it is essential to remain vigilant and consider alternative tools to preserve the purchasing power of their assets. Gold, cryptocurrencies, and real estate remain key options for those seeking to safeguard their finances in an environment of rising inflation.
Author Andrew Azarov