What to look for in tomorrow's inflation report

Consumer Price Index data for December, set for release tomorrow, should mark more progress in the nation's battle against inflation — if economists' estimates are right.

• The overall index is expected to show that prices dropped slightly by 0.1% last month. Stripping out food and fuel, prices are expected to climb a mild 0.3%.

Why it matters: Overall prices last fell in July, offering brief hope that inflation had turned a corner. That optimism was quickly dashed by hot readings in the ensuing months.

• But unlike then, December figures will be the latest in a stretch of cooling inflation — helped by falling goods prices — that looks set to continue this year.

Yes, but: Fed officials have made clear they are watching for signs that the hot labor market and higher wages are feeding through in the form of higher consumer costs.

• To that end, they will be looking at a very specific category where inflation might be more difficult to stamp out: services excluding housing, energy and food costs.
• "While there are growing signs that inflation has peaked, the Fed is worried about the overheating labor market," economists at Bank of America wrote this week. Tomorrow's CPI report is "unlikely to quell those concerns."