What's going on?

US prices chilled out in December, according to inflation data released on Thursday.

What does this mean?

Economic forecasters aren�t always on the money, but this time their crystal balls were as clear as, well, crystal. After all, an inflation rate of 6.5% in December � or 5.7% excluding food and energy � was right in line with predictions (tweet this), which meant markets didn�t really stir when the news dropped. And that shoulder shrug was understandable: stocks have had a strong start to 2023 already, so investors were more or less betting that inflation would be, relatively speaking, pretty tepid.

Why should I care?

For markets: Data�s a lag.
December was the sixth straight month that inflation slowed, and the market�s not expecting that winning streak to end anytime soon. It might be right: the prices of both housing and clothing rose in December, sure � but take a look at the here and now, and you�ll notice housing costs dropping, and a glut of unwanted clothing piled on retailers� shelves. So with signs that the prices of those inflation-fueling items could be switching directions, January�s data might also make for refreshing news.

The bigger picture: La la la, I�m not listening.
It doesn�t seem to matter that the stock market thinks inflation�s on a downward march: the Federal Reserve (the Fed) has already mapped out its hiking path, and seems unwilling to re-route come hell or high water. That puts the central bank at logger-heads with investors � and somebody�s going to have to blink first. The stock market thinks it�ll be the Fed, which has plenty of pivoting experience. But it could be wrong, and the Fed�s tenacity might spell the end of perky stock prices.