The Consumer Price Index rose 2.9 percent from a year earlier, but a measure of underlying inflation was more encouraging.

The Labor Department released the inflation report for December, which showed prices were up 2.9% from a year ago, in line with economists expectations and up from 2.7% in November.

Traders of interest-rate futures are now predicting nearly equal chances on Wednesday that the Federal Reserve will lower interest rates twice by the end of this year, according to data compiled by Reuters.

The Consumer Price Index ticked up by 0.4% in December, but a measure that excludes food and energy prices slowed for the first time in four months, the Labor Department said on Wednesday. Why it matters: Inflation resumed a cooling trend after a months-long interruption,

The Labor Department's inflation report for the month of December showed that food and energy prices were the primary drivers of stubborn inflation experienced by consumers.