US inflation rises less than expected in December

The US consumer price index rose 0.7% in the year to December, according to the Bureau of Labor Statistics on Wednesday.

While it marked an improvement on the previous month's 0.5% year-on-year growth, it remained below analysts' expectations of 0.8% and a long way off the Federal Reserve's 2% target.

A slump in oil and food prices continued to provide a drag on inflation. Energy prices fell 2.4% and food dropped 0.2% last month.

Excluding energy and food, CPI increased 2.1% in December, as expected, compared to 2% in November.

Between November and December, CPI fell 0.1%, surprising analysts' who had pencilled in an unchanged 0%. CPI rose 0.1% month-on-month in December, excluding energy and food, slowing from November's 0.2% increase and compared to estimates for no change.

Dennis de Jong, managing director at UFX.com, said plunging oil prices, falling inflation and worries about China's economic slowdown are combining to paint a very turbulent global picture.

“Janet Yellen and her Fed colleagues finally pressed the interest rate hike button last month, but another one in the next couple of months now looks highly unlikely," he said.

“Although US inflation rose slightly from last month, it is still tepid and sliding inflation expectations will be a worry for the Fed. Amid all this negativity, the US remains in a far stronger position than most other major economies and is still a long way from slipping into recession.”