Consumer price increases accelerated in November, a reminder that inflation remains a problem for households and policymakers.
this consumer price index The U.S. Bureau of Labor Statistics reported Wednesday that 12-month inflation was 2.7%, up 0.3% for the month. The annual rate increased by 0.1 percentage points from October.
Excluding food and energy costs, the core Consumer Price Index (CPI) increased by 3.3% on an annual basis and by 0.3% on a monthly basis. The 12-month core reading was unchanged from a month ago.
All numbers are in line with Dow Jones consensus estimates.
The data comes as Fed officials are considering the content of next week’s policy meeting. Markets strongly expect the Fed to cut its benchmark short-term borrowing rate by 0.25 percentage points at the end of the meeting on December 18, but then skip January. They measure the impact of successive interest rate cuts on the economy.
The report further solidified the prospect of a rate cut, with traders raising the likelihood of a rate cut to 99%, according to CME Group Fed Watch measure. The likelihood of a rate cut in January also increased slightly, reaching around 23%.
“Core inflation is in line, clearing the way for a rate cut at next week’s (Federal Open Market Committee) meeting,” said Whitney Watson, global co-head of fixed income and co-chief information officer at Goldman Sachs Asset Management. “According to today’s report “The Fed will end the holiday season still confident of its deflationary course, and we think it will further gradually ease monetary policy in the new year.”
Although inflation is well below its 40-year high in mid-2022, it is still above the Fed’s 2% annual target. In recent days, some policymakers have expressed frustration with the resilience of inflation and said the pace of rate cuts may need to slow if more progress is not made.
If the Fed continues to cut interest rates next week, the federal funds rate will be lowered by a full percentage point since September.
Most of November’s rise in CPI came from housing costs, which rose 0.3% and are one of the most stubborn components of inflation. Fed officials and many economists expect housing-related inflation to ease as new lease agreements are negotiated, but the program continues to increase each month.
The Bureau of Labor Statistics estimates that housing projects, which account for about one-third of the weight in CPI calculations, accounted for about 40% of November’s total gain. The housing index increased by 4.7% quarterly in November.
Used car prices rose 2% monthly, while new car prices rose 0.6%, reversing a recent trend of declining prices for these items.
Elsewhere, food costs rose 0.4% monthly and 2.4% annually, while the energy index rose 0.2% but fell 3.2% annually.
The rise in CPI means average hourly earnings The U.S. Bureau of Labor Statistics said in a separate press release that after adjusting for inflation, the employment rate of workers was essentially flat this month but increased 1.3% from a year earlier.
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