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US consumer inflation decelerated for the sixth consecutive month in December, paving a path for the Federal Reserve to further slow its pace of rate hikes. The consumer price index rose 6.5% compared to the same month a year earlier, the lowest level in more than a year and down from 7.1% growth in November. While inflation remains well above the Fed’s target, Thursday’s report is the latest sign that the rapid price increases seen for much of 2022 have cooled, aided by lower energy costs. In the eurozone, inflation dropped to 9.2% in December from 10.1%, fueling hopes that it has peaked amid a warmer-than-expected winter.

Following the CPI report, markets raised their bets that Fed officials would approve smaller 25-basis-point rate hikes in February and March, according to interest rate futures. From a longer-term perspective, developed-market economies are almost certainly at generational highs in growth, inflation and bond yields, PGIM Fixed Income explains in a post on The Bond Blog. While growth uncertainties created by the surge in rates may be a liability for more growth-sensitive investments, the opposite is likely to hold for fixed income, where a growth shortfall may very well boost performance.