Inflation is proving stickier than expected, which could cause Fed to hit pause button on more interest rate cuts.

Annual inflation ticked up for a third straight month in December as food, energy costs rose, CPI report showed. But underlying price measure eased.

Consumer Price Index showed an acceleration to 2.9%, the highest rate since July. With such high inflation, the Fed is unlikely to cut rates in January.

The consumer price index increased by 2.9 percent in December from a year earlier, the Labor Department reported Wednesday, in line with economists’ expectations and hotter than a 2.7 percent rise in November. It was also above a 2.6 percent annual increase in October.

The annual inflation rate for housing and household services was 6.0% in December 2024, up from 5.8% in November. This compares with a recent peak of 11.8% observed in January and February 2023. On a monthly basis, prices rose by 0.4% in December 2024, compared with a rise of 0.3% a year ago.

U.S. consumer prices increased by the most in nine months in December amid higher costs for energy goods, pointing to still-elevated inflation that aligns with the Federal Reserve's projections for fewer interest rate cuts this year.