U.S. inflation holds steady in November, easing pressure on the Federal Reserve

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In November, prices across a wide range of goods and services in the United States experienced a marginal increase, aligning closely with economists’ expectations. The Consumer Price Index (CPI), a crucial indicator of inflation, rose by 0.1% during the month and showed a 3.1% increase compared to the same period last year, according to the latest report from the Labor Department released on Tuesday. Economists surveyed by Dow Jones had anticipated no gain in the monthly rate and a yearly increase of 3.1%.

Although the monthly rate revealed a slight uptick from the flat CPI reading in October, the annual rate saw a decline, down from 3.2% in the previous month. Core CPI, which excludes volatile food and energy prices, increased by 0.3% on a monthly basis and registered a 4% rise from a year ago, in line with estimates and little changed from October.

Liz Ann Sonders, Chief Investment Strategist at Charles Schwab, commented on the report, stating that it was “somewhat in line,” but added that the hope for more significant deceleration on a month-over-month basis was not fully realized. She noted that the Federal Reserve would likely view continued disinflation as positive news.

Energy prices played a significant role in keeping inflation in check, with a 2.3% decrease overall. Gasoline prices fell by 6%, and fuel oil was down 2.7%. Food prices increased by 0.2%, driven by a 0.4% rise in food away from home. On an annual basis, food prices were up 2.9%, while energy prices saw a decline of 5.4%.

Shelter prices, comprising about one-third of the CPI weighting, rose by 0.4% in the month and increased by 6.5% on a 12-month basis. However, the annual rate has shown a steady decline since reaching its peak early in 2023.

The release of the inflation data coincided with the Federal Reserve’s two-day policy meeting, where the central bank was widely expected to maintain interest rates for the third consecutive time. Markets were keenly observing any signals regarding the future direction of monetary policy.

Having raised rates 11 times since March 2022, the Federal Reserve is anticipated to indicate that the era of policy tightening is over, with the next step likely to involve rate cuts at a pace yet to be determined. Futures pricing, post-release, continued to suggest virtually no chance of further rate hikes, with the first cut expected to occur in May.

Market expectations, as reflected in futures markets, suggest an aggressive easing stance by the Federal Reserve in 2024, with rates potentially cut by up to 1.25 percentage points by year-end.

(Source: Jeff Cox | CNBC)

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