Inflation Tick Higher in November, Keeping Pressure on Federal Reserve to Cut Interest Rates
The Consumer Price Index (CPI), a broad measure of everyday goods and services, rose 0.3% in November and 2.7% on an annual basis. The figure was in line with expectations, but marks the latest sign of persistent inflationary pressures in the US economy.
The increase in CPI was driven largely by higher housing costs, which accounted for nearly 40% of the headline gain. Shelter prices were up 0.3% on a monthly basis and 4.7% from last year. Energy prices also rose, but food prices remained steady.
Core prices, which exclude volatile measurements of gasoline and food, were up 0.3% on a monthly basis and 3.3% on an annual basis. Despite the persistence of inflationary pressures, the Federal Reserve is expected to cut interest rates next week, with markets predicting a 25 basis point cut.
Higher inflation has created severe financial pressures for many households, particularly those on lower incomes, who spend a larger portion of their paycheck on necessities. The data also highlights the impact of persistent inflation on households, particularly with regard to housing and food costs.
The Fed’s preferred inflation gauge, the personal consumption expenditures price index, showed price growth picking up in October, while the latest CPI data shows a steady trend in core inflation.
Despite the recent increases, the Federal Reserve is likely to focus on the underlying trend, rather than the short-term volatility in inflation. With inflation still below the central bank’s 2% target, the Fed may feel confident in its ability to maintain low interest rates to support economic growth.
As the Federal Reserve meets next week, policymakers are likely to consider the latest data on inflation, along with other indicators of the economy, to determine the best course of action for monetary policy.
