Consumer prices rose at a faster pace than usual in November, a reminder that inflation remains a problem for both households and policymakers.
The Consumer Price Index rose 0.3% from the previous month, bringing the 12-month inflation rate to 2.7%, the Bureau of Labor Statistics said Wednesday. The annual rate was 0.1 percentage point higher than in October.
Core CPI, which excludes food and energy costs, was 3.3% annually and 0.3% monthly. The 12-month core value is unchanged from a month ago.
Both numbers were in line with Dow Jones consensus estimates.
The statistics came as Federal Reserve officials consider what to do at next week’s policy meeting. Markets strongly expect the Fed to cut its benchmark short-term borrowing rate by a quarter of a percentage point at the end of its Dec. 18 meeting, but then skip January to gauge the impact of its successive rate cuts on the economy. are.
The report further solidified the market’s outlook for a rate cut, with traders raising the probability of a rate cut to 99%, according to CME Group’s FedWatch index. The probability of a reduction in January also rose slightly to about 23%.
Whitney Watson, global co-head and co-chief information officer of fixed income at Goldman Sachs Asset Management, said, “The rise in core inflation makes it more likely that next week’s (Federal Open Market Committee) meeting will be “This will pave the way for interest rate cuts.” “Following today’s numbers, we believe the Fed will go into the holidays still confident in the disinflationary process and we remain on track for further gradual easing in the new year. ”
Inflation is well off the 40-year high it hit in mid-2022, but remains above the Fed’s annual target of 2%. Some policymakers have expressed dissatisfaction with the resilience of inflation in recent days, saying they may need to slow the pace of rate cuts if further progress is not made.
If the Fed cuts interest rates next week, it would be the full cut in the federal funds rate since September.
Much of the CPI increase in November 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 rental lease negotiations progress, but the item continues to rise each month.
An indicator within the shelter component, which asks homeowners how much they would receive in rent for their property, rose 0.2%, as did the actual rent index. These were the smallest monthly increases since April and July 2021, respectively.
The BLS estimates that shelter-related items, which account for about one-third of the CPI calculation, accounted for about 40% of the total increase in November. The shelter index rose 4.7% in November on a 12-month basis.
Used car prices rose 2% for the month, while new car prices rose 0.6%, reversing recent trends.
Elsewhere, grocery costs rose 0.4% month-on-month and 2.4% year-on-year, while the energy index rose 0.2% but fell 3.2% on an annualized basis. Among foods, the cereal and bakery products index fell 1.1% in November, the largest monthly decline in the index’s history since 1989, according to the BLS.
In a separate release, the BLS said the CPI increase meant that workers’ average hourly wages, adjusted for inflation, were essentially flat for the month, but rose 1.3% from a year earlier.
