November Inflation Rate Rises to 2.7% – Surpassing Expectations
In a recent report released by the Bureau of Labor Statistics, it was revealed that the consumer price index showed a 12-month inflation rate of 2.7% in November, exceeding expectations. This uptick followed a 0.3% increase in the month, with the annual rate climbing 0.1 percentage point higher than the previous month. The core CPI, excluding food and energy costs, was also on the rise at 3.3% annually and 0.3% monthly, remaining unchanged from the previous month.
Fed’s Response and Market Expectations
Federal Reserve officials are currently deliberating over their next steps in response to this inflation data. Analysts predict that the Fed will lower its benchmark short-term borrowing rate by a quarter percentage point at their upcoming policy meeting on December 18. The market outlook for a rate cut is now solidified, with traders raising the odds to 99%, according to the CME Group’s FedWatch measure.
Whitney Watson, global co-head and co-CIO for fixed income at Goldman Sachs Asset Management, remarked, “In-line core inflation clears the way for a rate cut at next week’s [Federal Open Market Committee] meeting.” This sentiment echoes the confidence many have in the Fed’s course of action towards further gradual easing in the new year.
Impact on Housing and Other Key Components
The November increase in the CPI was primarily driven by rising shelter costs, which saw a 0.3% increase. Housing-related inflation has been a persistent factor, but experts anticipate it may ease as new rental leases are negotiated. Meanwhile, used vehicle prices rose by 2% monthly, while new vehicle prices increased by 0.6%, reversing a recent downward trend.
Food costs also saw a modest rise of 0.4% monthly and 2.4% year over year, while the energy index increased by 0.2% but was down by 3.2% annually. Notably, within the food category, cereals and bakery products experienced the largest monthly decline in history, falling by 1.1%.
Workers’ Earnings and Inflation Adjustments
The increase in the CPI had direct implications on workers’ earnings, as average hourly earnings were essentially stagnant for the month when adjusted for inflation. However, there was a 1.3% increase from a year ago, according to the BLS. This data underscores the ongoing impact of inflation on the economy and highlights the need for careful monitoring and response from policymakers moving forward.
In conclusion, the recent inflation data has raised concerns among both households and policymakers, signaling a need for proactive measures to address this economic challenge in the coming months.
