By CHRISTOPHER RUGABER, Associated Press Economics Writer

WASHINGTON (AP) — Inflation declined a bit last month as prices for gas and used cars fell, a sign that cost pressures are slowly easing.

FILE – A cashier rings up groceries in Dallas, Aug. 28, 2025. (AP Photo/LM Otero, File)

Consumer prices rose 0.3% in December from the prior month, the Labor Department said Tuesday, the same as in November. Excluding the volatile food and energy categories, core prices rose 0.2%, also matching November’s figure.

Even as inflation has eased, the large price increases for necessities such as groceries, rent, and health care have left many American households feeling squeezed, turning “affordability” issues into high-profile political concerns.

THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.

WASHINGTON (AP) — Inflation likely remained elevated last month as the cost of electricity, groceries, and clothing may have jumped and continued to pressure consumers’ wallets.

The Labor Department is expected to report that consumer prices rose 2.6% in December compared with a year earlier, according to economists’ estimates compiled by data provider FactSet. The yearly rate would be down from 2.7% in November. Monthly prices, however, are expected to rise 0.3% in December, faster than is consistent with the Federal Reserve’s 2% inflation goal.

The figures are harder to predict this month, however, because the six-week government shutdown last fall suspended the collection of price data used to compile the inflation rate. Some economists expect the December figures will show a bigger jump in inflation as the data collection process gets back to normal.

Core prices, which exclude the volatile food and energy categories, are also expected to rise 0.3% in December from the previous month, and 2.7% from a year earlier. The yearly core figure would be an increase from 2.6% in November.

In November, annual inflation fell from 3% in September to 2.7%, in part because of quirks in November’s data. (The government never calculated a yearly figure for October). Most prices were collected in the second half of November, after the government reopened, when holiday discounts kicked in, which may have biased November inflation lower.

And since rental prices weren’t fully collected in October, the agency that prepares the inflation reports used placeholder estimates that may have biased prices lower, economists said.

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Inflation has come down significantly from the four-decade peak of 9.1% that it reached in June 2022, but it has been stubbornly close to 3% since late 2023. The cost of necessities such as groceries is about 25% higher than it was before the pandemic, and other necessities such as rent and clothing have also gotten more expensive, fueling dissatisfaction with the economy that both President Donald Trump and former President Joe Biden have sought to address, though with limited success.

The Federal Reserve has struggled to balance its goal of fighting inflation by keeping borrowing costs high, while also supporting hiring by cutting interest rates when unemployment worsens. As long as inflation remains above its target of 2%, the Fed will likely be reluctant to cut rates much more.

The Fed reduced its key rate by a quarter-point in December, but Chair Jerome Powell, at a press conference explaining its decision, said the Fed would probably hold off on further cuts to see how the economy evolves.

The 19 members of the Fed’s interest-rate setting committee have been sharply divided for months over whether to cut its rate further, or keep it at its curent level of about 3.6% to combat inflation.

Trump, meanwhile, has harshly criticized the Fed for not cutting its key short-term rate more sharply, a move he has said would reduce mortgage rates and the government’s borrowing costs for its huge debt pile. Yet the Fed doesn’t directly control mortgage rates, which are set by financial markets.

In a move that cast a shadow over the ability of the Fed to fight inflation in the future, the Department of Justice served the central bank last Friday with subpoenas related to Powell’s congressional testimony in June about a $2.5 billion renovation of two Fed office buildings. Trump administration officials have suggested that Powell either lied about changes to the building or altered plans in ways that are inconsistent with those approved by planning commissions.

In a blunt response, Powell said Sunday those claims were “pretexts” for an effort by the White House to assert more control over the Fed.

“The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President,” Powell said. “This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions—or whether instead monetary policy will be directed by political pressure or intimidation.”

By MATT O’BRIEN and MARC LEVY, Associated Press

It won’t be easy for Big Tech companies to win the hearts and minds of Americans who are angered about massive artificial intelligence data centers sprouting up in their neighborhoods, straining electricity grids and drawing on local reservoirs.

Microsoft is trying anyway.

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The software giant’s president, Brad Smith, is meeting with federal lawmakers Tuesday to push forward an approach that calls for the industry, not taxpayers, to pay the full costs of the vast network of computing warehouses needed to power AI chatbots like ChatGPT, Google’s Gemini and Microsoft’s own Copilot. President Donald Trump gave Microsoft’s effort a nod in a Truth Social post Monday evening, where he stated that he does not want Americans to “pick up the tab” for these data centers and pay higher utility costs.

“Local communities naturally want to see new jobs but not at the expense of higher electricity prices or the diversion of their water,” Smith said in an interview with The Associated Press.

Smith’s campaign comes as data center developers are increasingly running into hostility in towns where they want to build and meeting defeat at municipal boards that must approve zoning applications or construction permits.

Rising electric prices are one problem. Heavy water usage by data centers to cool electronic equipment has also elicited concerns from local residents that they’ll see their wells run dry or their water utility bills spike.

The defeats have spread alarm among data center allies and spurred efforts to ramp up the amount of money that operators are willing to offer communities in exchange for approval.

“People are asking not just pointed questions but completely reasonable questions and it’s our job, I think, to acknowledge them and address them head on and show that we can do this and pursue this expansion in a way that fully meets their needs,” said Smith, who is also Microsoft’s vice chair and has spent decades leading its legal and political work.

In the mid-Atlantic region grid that encompasses all or parts of 13 states, ratepayers have been paying higher prices on their bills since at least June because of data centers, according to utilities and analysts.

Electricity bills are expected to keep rising as payments to power plant owners grow to entice the construction of new power sources to meet demand from new and yet-to-be-built data centers in hotspots like Virginia, Ohio and Pennsylvania.

Another source of friction is that big data center developers can strike bulk power deals with local electric utilities that are profitable for utilities, but also kept confidential. That means it may never be clear whether data center operators really are paying for their electricity — or foisting the cost onto the rest of the utility’s ratepayers, consumer advocates say.

Data center projects have also met objections in communities where people are worried about losing open space, farmland, forest or rural character, or are concerned about the damage to quality of life, property values, environment or their health.

In Hobart, Indiana, last week, the City Council approved a tax-abatement package for a multibillion-dollar Amazon data center planned there. In turn, the deal promises Amazon will make two payments of $5 million each for issuing a pair of building permits, plus another series of payments totaling $175 million over three years at various project milestones.

Opponents say the money unduly influences the decision-making of city officials.

In Wisconsin, where Smith grew up and the home of what Microsoft has called “the world’s most powerful AI datacenter,” the company has encountered hurdles in expanding its construction projects near the shores of Lake Michigan. The company has promised the centers will employ hundreds of people when they’re finished. Democratic Gov. Tony Evers has touted the projects he says will put Wisconsin “on the very cutting edge of AI power.”

But environmentalists and consumer groups have warned that the centers will consume unprecedented amounts of electricity, driving up rates across the Midwestern power grid, and could use hundreds of thousands of gallons of Lake Michigan water daily. Company officials have pledged that the centers’ impact will be minimal and will contribute carbon-free energy to the power grid.

Environmental group Clean Wisconsin has called for government officials to pause data center approvals until the state develops a comprehensive plan to regulate them. Francesca Hong, one of several Democratic candidates for governor — Evers is not seeking re-election in November — has developed a proposal she calls CONTROL ALT DELETE that calls for a moratorium on data center construction until “we know how to protect ourselves from their environmental and energy costs.”

In the interview with AP, Smith talked about data center projects in Wisconsin and elsewhere. This interview has been edited for clarity and length.

What’s the heaviest lift for Microsoft in terms of what you are contributing to ameliorate data center opposition?

Smith: We don’t use nearly as much water as we do electricity. Electricity is a heavier lift. It’s a larger investment. And it comes after several decades where electricity production in the United States was basically flat. If you look at the approach that we’re taking in terms of partnering with utilities, paying our own way, I think we can address this problem to the satisfaction of local communities. At the end of the day, it requires the approval of the utilities commissions.

Who are you talking about when you say you disagree with those who say AI is so beneficial that the public should help pay for the electricity the technology needs?

Smith: I shouldn’t name names. First of all, we wholeheartedly agree with the positive impact that AI is going to create for the future. But we don’t think that the public should be devoting tax dollars to pay for the improvements in the electricity grid that are needed to serve data centers. Private companies can incorporate that into their financial planning, especially when you look at things like improvements on the transmission side or improvements in substations.

Clean energy is not a priority for the current presidential administration. Are you still pushing for the electricity to power your data centers to be clean?

Smith: We set a goal for ourselves in 2020 of being what we call carbon-negative by 2030. That requires that we reduce the amount of carbon emissions that we create, and that we then remove from the environment each year, beginning in 2030, more carbon than we emit. We have not changed course on that. There are times when the power that is coming to our data centers is generated by something like natural gas. We can work with a utility to ensure that it’s cleaner natural gas, but beyond that, we also invest in bringing to the regional grid new sources of carbon-free energy as well, whether it’s nuclear, solar, hydro or others.

To what extent are you on track for the 2020 commitments?

Smith: On the carbon commitment, we have a clear path to reach our goal in 2030. As we often say, progress is lumpy, not linear. A lot of what we’re doing in the middle of the decade is making the investments that will benefit us at the end of the decade. It’s not like walking upstairs, where every step is the same length. But overall, I continue to be confident in our ability to meet our goals at the end of the decade.

What’s your position on groups calling for Wisconsin to pause AI data center approvals until there’s a plan to ensure these projects won’t harm communities?

Smith: We are supportive of Wisconsin developing a comprehensive electricity plan. I don’t think our project should be paused to wait for that. We’re partnering to build out and improve the electricity grid in southeastern Wisconsin. A rate tariff that we have proposed to the public utility commission would impose on Microsoft additional costs that we would help pay for in the state. And because of other investments we’re making, including a 150-megawatt solar farm.

AP writer Todd Richmond in Madison, Wisconsin, contributed to this report.

By DAVID McHUGH, Associated Press Business Writer

FRANKFURT, Germany (AP) — Central bankers from around the world said Tuesday they “stand in full solidarity” with U.S. Federal Reserve Chair Jerome Powell, after President Donald Trump dramatically escalated his confrontation with the Fed with the Justice Department investigating and threatening criminal charges.

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Powell “has served with integrity, focused on his mandate and an unwavering commitment to the public interest,” read the statement signed by nine national central bank heads including European Central Bank President Christine Lagarde and Bank of England Governor Andrew Bailey.

They added that “the independence of central banks is a cornerstone of price, financial and economic stability in the interest of the citizens that we serve. It is therefore critical to preserve that independence, with full respect for the rule of law and democratic accountability.”

The dispute is ostensibly about Powell’s testimony to Congress in June over the cost of a massive renovation of Fed buildings. But in a statement Sunday, Powell, abandoning his previous attempt to ignore Trump’s relentless criticism, called the administration’s threat of criminal charges “pretexts’’ in the president’s campaign to seize control of U.S. interest rate policy from the Fed’s technocrats.

Trump has repeatedly criticized Powell and the Fed for not moving faster to cut rates. Economists warn that a politicized Fed that caves in to the president’s demands will damage its credibility as an inflation fighter and likely lead investors to demand higher rates before investing in U.S. Treasurys.

Other signatories of the statement carried on the ECB’s website were Erik Thedeen, governor of Sweden’s central bank; Christian Kettel Thomsen, chair of Denmark’s central bank; Swiss National Bank Chair Martin Schlegel; Michele Bullock, governor of the Reserve Bank of Australia; Tiff Macklem, governor of the Bank of Canada; Bank of Korea Governor Chang Yong Rhee; Gabriel Galipolo, governor of the Banco Central do Brasil.

Also attaching their names were François Villeroy de Galhau, board chair of the Bank for International Settlements, and Pablo Hernández de Cos, BIS general manager. The BIS is an international organization of central banks based in Basel, Switzerland.

One prominent central bank not included in the statement was the Bank of Japan. The statement said that more signatures could be added later.

By MARK SHERMAN, Associated Press

WASHINGTON (AP) — The Supreme Court is hearing arguments Tuesday over state laws barring transgender girls and women from playing on school athletic teams.

Lower courts ruled for the transgender athletes in Idaho and West Virginia who challenged the state bans, but the conservative-dominated Supreme Court might not follow suit.

FILE – Protestors hold signs during a rally at the state capitol in Charleston, W.Va., on March 9, 2023. (AP Photo/Chris Jackson, file)

In just the past year, the justices ruled in favor state bans on gender-affirming care for transgender youths and allowed multiple restrictions on transgender people to be enforced.

The legal fight is playing out amid a broad effort by President Donald Trump to target transgender Americans, beginning on the first day of his second term and including the ouster of transgender people from the military and declaring that gender is immutable and determined at birth.

The culture war cases come from Idaho and West Virginia, among the first of the more than two dozen Republican-led states that have banned transgender athletes from girls’ and women’s teams.

The justices are evaluating claims of sex discrimination lodged by transgender people versus the need for fair competition for women and girls, the main argument made by the states.

In the first case, Lindsay Hecox, 25, sued over Idaho’s first-in-the-nation ban for the chance to try out for the women’s track and cross-country teams at Boise State University in Idaho. She didn’t make either squad but competed in club-level soccer and running.

Becky Pepper-Jackson, a 15-year-old high school sophomore, has been taking puberty-blocking medication, publicly identified as a girl since age 8 and has been issued a West Virginia birth certificate recognizing her as female. She is the only transgender person who has sought to compete in girls’ sports in West Virginia.

Pepper-Jackson has progressed from a back-of-the-pack cross-country runner in middle school to a statewide third-place finish in the discus in just her first year of high school.

Prominent women in sports have weighed in on both sides. Tennis champion Martina Navratilova, swimmers Summer Sanders and Donna de Varona and beach volleyball player Kerri Walsh-Jennings are supporting the state bans. Soccer stars Megan Rapinoe and Becky Sauerbrunn and basketball players Sue Byrd and Breanna Stewart back the transgender athletes.

The high-court arguments are expected to focus on whether the sports bans violate the Constitution or the landmark federal law known as Title IX, which prohibits sex discrimination in education.

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In 2020, the Supreme Court ruled LGBTQ people are protected by a landmark federal civil rights law that prohibits sex discrimination in the workplace, finding that “sex plays an unmistakable role” in employers’ decisions to punish transgender people for traits and behavior they otherwise tolerate.

But last year, the six conservative justices on the nine-member court declined to apply the same sort of analysis when they upheld state bans on gender-affirming care for transgender minors.

The states supporting the prohibitions on transgender athletes argue there is no reason to extend the ruling barring workplace discrimination to Title IX, which dramatically increased opportunities for girls and women in school sports.

Lawyers for Pepper-Jackson argue that the law protects people like their client from discrimination. They are asking for a ruling that would apply to the unique circumstances of her early transition. In Hecox’s case, her lawyers want the court to dismiss the case because she has forsworn trying to play on women’s teams.

Despite the small numbers of transgender athletes, the issue has taken on outsize importance. The NCAA and the U.S. Olympic and Paralympic Committees banned transgender women from women’s sports after Trump, a Republican, signed an executive order aimed at barring their participation.

The public generally is supportive of the limits. An Associated Press-NORC Center for Public Affairs Research poll conducted in October 2025 found that about 6 in 10 U.S. adults “strongly” or “somewhat” favored requiring transgender children and teenagers to only compete on sports teams that match the sex they were assigned at birth, not the gender they identify with, while about 2 in 10 were “strongly” or “somewhat” opposed and about one-quarter did not have an opinion.

About 2.1 million adults, or 0.8%, and 724,000 people age 13 to 17, or 3.3%, identify as transgender in the U.S., according to the Williams Institute at the UCLA School of Law.

A decision is expected by early summer.