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The spike in oil and gas prices presents already-divided Federal Reserve officials with a worst-case scenario as they conclude a key meeting March 18.

Compared with a year ago, inflation rose 2.9% in December, up from 2.8% in November. That is the largest yearly increase since March 2024.

The report suggests inflation could be cooling, but it comes after the cost of food, gas, and rents soared after the pandemic, with consumer prices about 25% higher than they were five years ago.

Consumer prices rose 2.8% in November from a year earlier, the Commerce Department said Jan. 22, up from a 2.7% annual pace in October. Excluding food and energy, core prices also increased 2.8%.

Consumer prices rose 0.3% in December from the prior month, the Labor Department said Jan. 13, the same as in November. Excluding food and energy, core prices rose 0.2%.

Employers added just 50,000 jobs last month, nearly unchanged from a downwardly revised figure of 56,000 in November, the Labor Department said Jan. 9. The unemployment rate slipped to 4.4%.

The Federal Reserve reduced its key interest rate for the third time in a row Dec. 10 but signaled that it may leave rates unchanged in the coming months.

The data shows that inflation was muted in September and will bolster the case for a cut to the Fed’s key interest rate at its next meeting Dec. 9-10.

U.S. consumers were much less confident in the economy in November in the aftermath of the government shutdown, weak hiring and stubborn inflation.

The figures show that inflation continues to rise more slowly than many economists expected when President Donald Trump imposed sweeping tariffs in April.