Moreover, stronger inflation numbers should give the Federal Reserve confidence to raise interest rates this year at a steady clip, which can also be bearish for bonds. Fed policy makers have penciled in three rate hikes in 2018 following three a year ago.
That was the biggest advance in the so-called core CPI since January and followed a 0.1 percent gain in November.
Core CPI rose at a monthly rate of 0.3% in December, beating expectations of a 0.2% rise, while the annual pace of inflation rose to 1.8% from 1.7% in November.
However, excluding volatile food and fuel components, "core" CPI rose 0.3 percent last month, the biggest jump since January 2017, on rising costs for shelter and medical care. He added that while the strong rise in core inflation is not a trend, it appears price pressures are heading in the right direction.
The Fed's 2% annual inflation target is based on officials' preferred price measure, the Commerce Department's personal-consumption expenditures price index.
The dollar fell to a session low against a basket of currencies after the data. The yield on the benchmark 10-year U.S. Treasury note closed above 2.5% earlier this week for the first time since March, and it moved higher Friday morning after the inflation and spending data were released. USA stock index futures pared gains. Owners' equivalent rent of primary residence climbed 0.3 percent after gaining 0.2 percent in November.
The broadest gauge of inflation showed a slowdown in December, rising 2.1% compared to 2016, as expected, which was slightly down from November's 2.2% result, said data from the Bureau of Labour Statistics on Friday. It increased borrowing costs three times in 2017. Consumer durables output grew 2.5 per cent in November, sharply down from 6.8 per cent a year ago.
Meanwhile, used auto and truck prices jumped 1.4% in the month, while new vehicle prices gained 0.6%. Apparel prices were down 0.5% last month, making it the fourth straight decline.
The for final demand slipped 0.1 percent last month. It revised November data to show a gain of 0.9 per cent instead of the previously reported 0.8 per cent increase. The nationwide average for gas is $2.52, up from $2.35 a year ago, according to AAA. The cost of healthcare services increased 0.2 percent last month after being unchanged in November.