New inflation data released Wednesday showed consumer prices rose as expected in November, keeping the US Federal Reserve on track to cut interest rates again in December.
The Consumer Price Index (CPI) rose 2.7% year over year in November, up slightly from October’s 2.6% annual rise, according to the latest data from the U.S. Bureau of Labor Statistics. The annual increase was in line with economists’ expectations.
The index rose 0.3% from the previous month, exceeding October’s 0.2% rise and in line with economists’ expectations. This was the biggest monthly increase since April, following a 0.2% rise in the previous four months.
On a “core” basis, excluding volatile food and gas prices, prices in November rose 0.3% month-on-month, the same level as October, and increased 3.3% year-on-year for the fourth consecutive month.
Paul Ashworth, chief North American economist at Capital Economics, said Wednesday that print stickiness is “a little disconcerting.” “But we don’t think that will persuade the Fed to forego another 25bp rate cut at next week’s FOMC meeting.”
Core inflation remains high due to rising costs of services such as shelter, insurance and health care. Used car prices also rose month-on-month, rising 2% in November following a rebound in auction prices.
Although inflation has slowed, it remains above the Federal Reserve’s 2% annual target.
The election of Donald Trump as the next president further complicates the outlook, with some economists saying the U.S. could face another resurgence in inflation if Trump follows through on his key campaign promises. claims.
Economists believe that President Trump’s proposed policies, such as high tariffs on imports, tax cuts for businesses and immigration restrictions, could potentially cause inflation. Such policies could further complicate the Fed’s future direction of interest rates.
Immediately after the report, markets continued to price in a further 25 basis point rate cut at next week’s central bank meeting, increasing the probability of a rate cut to 97% from about 89% a day earlier.
Seema Shah, chief global strategist at Principal Asset Management, said: “While markets came into today’s numbers worried about unexpected gains, these inline numbers have been received very favorably.” said. “Overall, however, the Fed is concerned about the very stubborn nature of inflation and will become increasingly cautious about the upside risks to inflation that President-elect Trump’s policies may pose.”
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“We expect the Fed to go off autopilot in January, take a more cautious stance, and reduce the pace of rate cuts at each meeting.”
Federal Reserve Chairman Jerome Powell speaks at the Dealbook Summit in New York on Wednesday, December 4, 2024. (AP Photo/Seth Wenig) ·Related news organizations
Keep your shelter modest and your food sticky.
One notable aspect of inflation statistics is the shelter index. The index rose 4.7% on an unadjusted annualized basis, lower than October’s 4.9% rise. The index rose 0.3% from the previous month, following a 0.4% rise in October.
Shelters contributed nearly 40% of the month’s overall increase in inflation, according to the BLS. Economists say the rise in core inflation is mainly due to sticky shelter inflation.
At Yahoo Finance’s Invest Conference last month, Minneapolis Fed President Neel Kashkari categorized housing inflation as “a big elephant that still exists,” but said prices are rising as new rentals are signed at lower interest rates. He said he was confident the rise would slow.
The Rent Index and Owner Equivalent Rent (OER) Index each rose 0.2% from October to November, but slowed from the previous month’s readings and were the smallest one-month figures since July 2021 and April 2021, respectively. It was an increase. Owner’s equivalent rent is the hypothetical rent that a homeowner would pay for the same property.
The non-home accommodation index rose 3.2%, following a 0.4% rise in October.
Close-up rear view of real estate agent adjusting sign in front yard of house ·Grace Cary via Getty Images
Meanwhile, the energy index rose 0.2% month-on-month after remaining flat in October. On a yearly basis, the energy index fell by 3.2% in November, following a 4.9% decline in the previous month.
The food index rose 2.4% in November compared to last year, and food prices rose 0.4% month-on-month, proving to be a troublesome category for inflation. Following a 0.1% rise in prices from September to October, the eating-in index increased by 0.5% in November, while the eating-out index increased by 0.3%.
Egg prices were outstanding, rising 8.2% month-on-month after falling 6.4% in October.
Other indicators that have seen notable increases over the past month include recreation, education, personal care, and apparel. In contrast, the Communication Index fell 1% in November, after declining 0.6% in October and September, according to the BLS.
Alexandra Canal is a senior reporter at Yahoo Finance. X @allie_canal, follow her on LinkedIn and email alexandra.canal@yahoofinance.com.
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