Inflation Trends and the RCF Inflation Scorecard – December 2022

Prices Fall in December but Inflation Battle Not Yet Over

Peter Bernstein, Chief Economist,, 312-431-1540 x1515

The Current Situation

The CPI fell 0.1% in December, the first reported monthly decline in overall prices since the 2020 pandemic.  The decline was driven mostly by a drop in fuel prices; core inflation (which excludes food and energy) increased 0.3%, a bit above the 0.2% increase in core prices in November.  This indicates that while inflation is definitely on the decline, the battle against inflation has not yet been won. Overall CPI was up 6.4% compared to a year ago, a marked decline from its peak of 9.1% in June.  Core inflation was 5.7%, a much smaller drop from its peak of 6.7%.  Since core inflation measures are the focus of the Federal Reserve, we don’t believe the December CPI data will cause the Fed to stop its interest rate hikes at this point.

Price declines occurred for those products which saw the largest price increases in the past (motor fuel, new and used vehicles).  In fact, the CPI for goods fell 1.1% in December but the CPI for the much larger category of services rose 0.6%.  The service CPI increase was mostly a result of another large monthly increase in housing costs. 

RCF’s Inflation Scorecard

RCF’s Inflation Scorecard is based on analysis of 20 different price series comprising 98% of the total consumer price index.  Each of these price series represents a portion of the CPI based on household spending patterns.  For example, food purchased for at-home consumption is about 8% of the typical consumer’s budget; it has a weight of 8.17 out of a total index of 100 as detailed later in this report.

Our scorecard presents two metrics to track month-to-month price increases.  The first metric is the share of the index for which inflation in the most recent month is rising (greater than the prior month’s inflation) vs. the share of the index for which inflation is falling (lower than the prior month) or prices fell (deflation).  Because deflation is showing up across more categories, we’ve added a separate measure of the total weight of deflation within the CPI index. 

Our second metric is the share of the index for which the most recent month’s inflation exceeded 0.2%, a monthly rate that corresponds closely to the Federal Reserve’s target inflation rate of 2% per year.   

RCF’s December Scorecard shows that 44.8% of the weighted CPI had either falling prices or falling inflation versus November, while 44.4% of the index has rising inflation.  Our second metric finds that 54% of the weighted CPI had price increases above 0.2% in December.  Still, that’s the lowest share of the index that exceeded the Fed’s price target since April 2021, further evidence that the economy is moving closer and closer to price stability.   

RCF Inflation Scorecard: December 2022  

Analysis of Individual Components of the Consumer Price Index

Sources: Bureau of Labor Statistics and RCF Calculations. 1. Inflation direction indicates whether monthly inflation in December was higher or lower than monthly inflation in November.  Deflation means prices fell in December compared to November.


  • 2022 was a tale of two halves.  In the first six months of the year, prices rose at an 10.9% annualized rate.  In the second half of the year, annualized inflation was only 1.9%.  But core inflation in the second half was a still too high 4.5% albeit down from the 6.7% core inflation rate in the first half of 2022.
  • The 9.2% monthly drop in motor fuel prices knocked about 0.4% off the CPI explaining difference between December’s overall CPI increase and the core increase.
  • Vehicle prices are falling especially for used cars and trucks which have declined for six straight months.  They fell 8.8% in 2022 reversing some of the huge increases from 2021. 
  • Food-at-home prices increased just 0.2% in December, bringing this important category down to the Fed’s target.  The price of food-away-from home increased 0.4%, the smallest monthly gain since March.
  • Rents and owner equivalent rent both increased 0.8% in December and are up about 8% vs. a year ago.  In time, recent declines in new lease rents will show up more prominently in the CPI, but as measured, housing costs are the biggest contributor to core inflation.