Personal Finance

Here’s the inflation breakdown for December 2024 — in one chart

Published

7 hours ago

January 15, 2025

Business Finance News

A customer browses eggs on partially empty shelves at a grocery store in Lawndale, California, on Jan. 2, 2025.

Patrick T. Fallon | AFP | Getty Images

Inflation ticked up in December on the back of higher energy and food prices, according to the consumer price index.

The CPI, an inflation gauge, rose 2.9% in December 2024 versus the prior year, the Bureau of Labor Statistics reported Wednesday,

That’s up from a 2.7% annual inflation rate in November, and from a recent low of 2.4% in September.

While the upward move may seem disheartening, evidence suggests inflation should resume its downward drift in 2025, economists said.

But they caution that President-elect Donald Trump’s incoming administration could stall or reverse that progress if it pursues policies like tariffs and tax cuts, which, depending on their scope, may be inflationary.

“The key wildcard here is policy,” Joe Seydl, a senior markets economist at J.P. Morgan Private Bank, said of inflation’s trajectory.

The CPI measures how quickly prices rise or fall for a basket of goods and services, from haircuts to coffee, clothing and concert tickets.

CPI inflation has declined significantly from its pandemic-era high of 9.1% in June 2022. However, it remains above the Federal Reserve’s target. The central bank aims for a 2% annual rate over the long term.

(The Fed uses a different but similar inflation measure, the Personal Consumption Expenditures Price Index. CPI readings tend to run about 0.2 to 0.3 percentage points higher, Seydl said.)

“We’re not that far away,” Seydl said. “By the end of this year, we’d expect the year-over-year rates to be back in those targets.”

Eggs are a ‘swing factor’

There were some trouble spots in December.

For example, grocery prices increased by 0.3% from November to December, according to CPI data. (A rise of about 0.2% a month is consistent with hitting the Fed’s target, economists said.)

Eggs are a “swing factor” contributing to that increase, Seydl said.

An outbreak of avian influenza, known as bird flu, in the U.S. has had a “significant impact” on egg prices, he said. The virus is highly contagious among birds and has killed millions of egg-laying chickens, reducing egg supply.

Egg prices jumped 3.2% from November to December, the largest increase for any grocery item, according to the CPI. They’re up 37% since December 2023.

Brandon Bell | Getty Images News | Getty Images

Inflation for gasoline jumped, too: Prices increased 4.4% from November to December, according to CPI data.

However, consumers may not be seeing that in the real world, though: Average prices at the pump actually fell about two cents last month, to $3.01 a gallon on Dec. 30 from $3.03 on Dec. 2, according to weekly Energy Information Administration data.

Federal statisticians adjust inflation data for seasonal patterns; gasoline prices fell less than usual in December, and the CPI registered this lower-than-normal drop as an inflation increase, Seydl said.

Gasoline prices are down more than 3% in the past year, according to the CPI. Groceries are up 1.8%.

Shelter inflation continues to retreat

Meanwhile, there were some bright spots in the CPI report, such as shelter.

The 4.6% annual inflation rate for housing in December was the lowest since January 2022. As the largest component of the price index, it has a significant bearing on inflation’s trajectory.

Economists prefer looking at a measure known as “core” CPI, which strips out volatile food and energy prices, for a more accurate reading of underlying inflationary dynamics.

There, the picture is better: Core CPI fell to 0.2% on a monthly basis in December, after having been stuck at 0.3% a month since August. The annual core inflation rate fell to 3.2% from 3.3%.

Core inflation rate slows to 3.2% in December, less than expected

“It’s encouraging that inflation continues to throttle back, slowly but steadily,” said Mark Zandi, chief economist at Moody’s.

“The only difference between where we are and the Fed’s target is growth in the cost of housing,” he said. “That’s now definitively slowing.”

Zandi estimates inflation could return to its target level by spring or summer, barring any speed bumps from Trump administration policy.

Wage growth continued to cool in December even as the labor market remained strong: Average hourly earnings grew at a 3.9% annual rate last month, down from 4% in November, according to a separate BLS report issued Friday.

This is important because labor is a major input cost for businesses, especially those in the service sector like leisure and hospitality. Businesses may raise prices if wage growth spikes.

Trump tariff threat may influence consumer buying

Elsewhere, airline fares rose 3.9% from November to December, after rising 0.4% the prior month. Used car and truck prices jumped 1.2% during the month and those for new vehicles increased 0.5%.

Increases for new and used vehicles “points to a continued surge in demand for replacement vehicles after October’s hurricanes, which will receive a renewed impetus from the California wildfires,” Thomas Ryan, North America economist at Capital Economics, wrote in a note on Wednesday.

Car insurance prices increased by 0.4% on the month, and are up 11% since December 2023.

This is largely due to a lag effect from high vehicle inflation earlier in the pandemic, economists said. Car prices feed into motor vehicle insurance: When prices are elevated, insurers’ cost to replace vehicles after a car accident is also much higher.

At least some of the recent increase in auto prices may be because consumers are speeding up purchases — thereby raising demand — to avoid potential tariffs imposed by the Trump administration, Seydl said.

Data from a recent University of Michigan Consumer Sentiment Survey “suggest that consumers are becoming more worried about the likely stagflationary impact of Trump’s policy plans,” Stephen Brown, deputy chief North America economist at Capital Economics wrote Friday.

“The expectation of tariffs to come mean consumers judge that it is a better time to buy durable goods,” he wrote.

Personal Finance

Biden forgives $4.5 billion for 261,000 borrowers from Ashford University

Published

1 hour ago

January 15, 2025

Business Finance News

Headquarters of Ashford University in San Diego, a for-profit university belonging to Bridgepoint Education.

Frank Duenzl | Picture-Alliance | DPA | AP

The Biden administration announced on Wednesday that it would forgive $4.5 billion in student debt for 261,000 borrowers who attended the now-defunct Ashford University.

Borrowers who qualify for the relief are those who studied at the largely online institution between March 1, 2009 and April 30, 2020.

The California Department of Justice requested the loan cancellation for federal student loan borrowers based on evidence it gathered during its lawsuit against Ashford University and its parent company, Zovio, Inc., the Education Department said.

The University of Arizona acquired Ashford University in 2020. Zovio approved a plan to go out of business in late 2022, according to HigherEd Dive.

The University of Arizona did not immediately respond to a request for comment.

California’s Justice Department accused the university of deceiving students by making false promises and providing false information, including about costs and career outcomes, to get them to enroll.

“Numerous federal and state investigations have documented the deceptive recruiting tactics frequently used by Ashford University,” said U.S. Under Secretary of Education James Kvaal in a statement.

“In reality, 90 percent of Ashford students never graduated, and the few who did were often left with large debts and low incomes.”

Since Biden took office, he has forgiven debt for more than 5 million federal student loan borrowers, totaling $183.6 billion in relief.

Personal Finance

What homeowners, renters need to do after a wildfire

Published

2 hours ago

January 15, 2025

Business Finance News

Flames and smoke from the Palisades Fire surround a home (C) in the community of Topanga, California, on January 9, 2025.

David Swanson | Afp | Getty Images

Firefighters are still working to contain the record-breaking fires that have been raging for more than a week in Southern California.

The fires in the Greater Los Angeles area have burned through 40,000 acres, destroying more than 12,300 structures, according to NBC News. About 88,000 L.A. residents are under evacuation orders and another 89,000 are in evacuation warning zones, meaning they may need to leave at a moment’s notice.

The insured losses from the early January wildfires may cost over $20 billion, according to estimates published last week by JPMorgan. Wells Fargo similarly estimated about $20 billion worth of insured losses with an approximate $60 billion economic loss.

As many affected residents are trying to figure out what’s next, one of the first things to do is kickstart the insurance process, according to Karl Susman, insurance broker and president of Susman Insurance Services in Los Angeles.

“Get your claim filed as quickly as you can,” he said. “You don’t have to have all of the information on hand.”

Insurers are likely to take a longer time than usual to process claims because of the influx of applications, he said, so the sooner you get the ball rolling, the better.

If your primary residence has been affected by wildfire — whether you rent or own — experts advise taking these seven steps right away.

1. File the claim first, assess damage later

You don’t have to wait for firefighters to completely put out the fire to file an insurance claim.

Even if you’ve already evacuated and are unaware of the status of your home, you can still begin the claims process, Susman said.

Factors like the type and extent of the damage, the complexity of the claim and the volume of insured losses can affect the insurer’s processing time, experts say.

Renters have access to most of the same resources homeowners do, said Shannon Martin, a licensed insurance agent and analyst at Bankrate.com.

“For the most part, renters can follow the same process as homeowners,” she said. “You want to get yourself to safety, set up your insurance claim and then ask if you can get any additional living expenses in advance.”

2. Ask about ‘loss of use’ coverage

Ask your provider about “loss of use” coverage under your home insurance policy, said Jeremy Porter, head of climate implications research at First Street Foundation, an organization based in New York City that focuses on climate risk financial modeling.

The coverage would allow you to secure temporary housing or lodging while you’re out of your home, he said: “It’s there specifically to give people kind of a lifeline when they can’t move back into the dwelling.”

Tenants may have similar coverage — it’s generally known as Coverage D in renters insurance policies, Porter said.

3. Keep your receipts and document everything

If you have loss of use coverage, make sure to keep every receipt for any clothes, food and temporary housing or hotel stays you may need. Also keep track of your activities and document all of your conversations with insurers, according to Douglas Heller, director of insurance at the Consumer Federation of America.

“The better you document what you are doing as you go through this awful time, the easier it will be to demonstrate your claim for reimbursements,” he said.

4. Turn off your utilities

If the fire caused severe damage or you suffered a complete loss of your home, contact your utilities — such as electricity, water and trash collection companies — to temporarily shut off service. You may not have to pay for these services for the time being, Susman said.

Measuring damage from California wildfires: Here's what to know

5. Contact your auto insurer

If you lost a vehicle in the fire, the damage may be covered under your auto insurance policy, Susman said.

“It’s not going to be under your home [insurance policy] exactly, even if the car was in your driveway,” Susman said.

Look for what’s called comprehensive coverage under your auto insurance, he said.

If you have comprehensive coverage on your car, you’re typically covered for wildfire loss, and “you just have to pay your deductible,” Bankrate’s Martin said.

6. Don’t forget property taxes

If your home suffered damages, or was a total loss, go to your county assessor’s website and type in your address.

If you’ve sustained more than $10,000 in damages, or the home is a total loss, you can file for an application to reduce or eliminate your property tax while the dwelling is under construction or uninhabitable, insurance expert Susman said.

“That’s something that people tend to not know or they overlook it,” he said.

7. Tap local aid opportunities

If you were not previously covered or your coverage was canceled before the disaster hit, keep an eye out for aid that may become available for those affected by the wildfires, Susman said.

“For people that had zero insurance, [there will] probably be some type of assistance that will be available,” Susman said.

During a White House briefing, President Joe Biden announced a one-time payment of $770 through the Federal Emergency Management Agency is available for the wildfire victims. Nearly 6,000 survivors have registered for the aid and $5.1 million has gone out, according to The White House.

Those impacted can file for aid via DisasterAssistance.gov or FEMA’s hotline at 1-800-621-3362.

California’s Insurance Commission can be reached at 1-800-927-4357 to help individuals navigate the process as well as help uninsured victims.

FEMA is also providing assistance to those affected by the wildfires.

If you were not previously covered by an insurance plan, the agency’s Individuals and Households Program may provide funds for temporary housing.

Affected individuals can apply online at DisasterAssistance.gov or by calling 1-800-621-3362.

Seek out local support groups and workshops. The Insurance Commission of California will host its first workshop involving government representatives and insurers on Jan. 18-19 at Santa Monica College. Follow-up events are scheduled on Jan. 25- 26 at Pasadena College.

Some charities and nonprofits are actively accepting donations and are engaging in recovery efforts in the Pacific Palisades and surrounding areas.

Personal Finance

Biden administration seeks to avoid student loan default crisis

Published

3 hours ago

January 15, 2025

Business Finance News

President Joe Biden is joined by Education Secretary Miguel Cardona as he announces new actions to protect borrowers after the Supreme Court struck down his student loan forgiveness plan, in the Roosevelt Room at the White House in Washington, D.C., on June 30, 2023.

Chip Somodevilla | Getty

This year, for the first time in roughly five years, borrowers who have defaulted on their federal student loan debt will face collection activity, including the garnishment of their wages and retirement benefits.

In a new U.S. Department of Education memo obtained by CNBC, a top official lays out for the first time details of when garnishments may resume — in some cases, as early as this summer.

The memo, dated days before the Trump administration takes over, details steps the Biden administration has taken to stave off a default crisis among federal student loan borrowers. It outlines strategies for the department to help student loan borrowers stay current as collection efforts resume this year.

“It is critical to continue the initiatives and fully implement the actions outlined in this memo, as the Department plans to resume default penalties and mandatory collections later this year,” U.S. Undersecretary of Education James Kvaal writes in the memo addressed to Denise Carter, acting chief operating officer for Federal Student Aid.

There were around 7.5 million federal student loan borrowers in default, the Education Department said in 2022. That grim figure has led to comparisons with the 2008 mortgage crisis.

Borrowers could face Social Security offsets by August

After the Covid-era pause on federal student loan payments expired in September 2023, the Biden administration offered borrowers a 12-month “on-ramp” to repayment. During that time, they were shielded from most of the consequences of falling behind on their payments. The relief period expired on Sept. 30, 2024.

Now federal student loan borrowers in default may see their wages garnished starting in October of this year, according to the Education Department. Meanwhile, Social Security benefit offsets could resume as early as August.

The Department of Education memo directs its Federal Student Aid office to continue the Biden administration’s work to avoid defaults.

That includes making it easier for borrowers to enroll in affordable repayment plans, such as letting borrowers authorize the department to obtain their income information from the IRS and to automatically enroll borrowers in an income-driven repayment plan if they become 75 days delinquent on their loans. (IDR plans base a borrower’s monthly bill on their discretionary income and family size, and some are left with a $0 monthly bill. Any remaining debt is canceled after a certain period, typically 20 or 25 years.)

Borrowers should also be “screened for other forgiveness opportunities before they formally default,” the memo says.

The memo also encourages the Education Department to explore options for increasing the current interest rate incentive to get borrowers to sign up for automatic payments to their student loan servicer. As of now, borrowers can typically get an 0.25 percentage point reduction in their interest rate by doing so.

Fewer consequences on defaulted student loans

Later this year, for the first time, borrowers in default will be able to enroll in the Income-Based Repayment plan “and have a pathway to forgiveness,” the memo says. Currently, federal student loan borrowers need to exit default before they can access any of the income-driven repayment plans, including the IBR.

According to the memo, the Biden administration has eliminated most collection fees on federal student loans.

In early 2024, it also took steps to protect a higher amount of people’s Social Security benefits from the department’s collection powers. When the consequences of defaults resume, those with a monthly Social Security benefit under $1,883 can protect those benefits from offset, compared with the current protected amount of $750 in place today.

“Available data suggest that these actions will effectively halt Social Security offsets for more than half of affected borrowers and reduce the offset amount for many others,” the memo says.

This is a developing story. Please refresh for updates.