US consumer prices rose less than expected for a second straight month in November, resulting in the smallest annual rise in inflation in nearly a year and giving the Federal Reserve some cover this week to start reducing size. of its interest rate increases.
Readings of the consumer price index last month reflected declines in the costs of gasoline, health care and used cars and trucks, the Labor Department said Tuesday. But the prices of food and rental housing continued to rise.
The report, which also showed core inflation posted its smallest monthly rise in more than a year, was released as US central bank officials met for their last two-day policy meeting of the year.
The Federal Reserve, in the midst of its fastest rate-hike cycle since the 1980s, is expected to raise its benchmark overnight interest rate by 50 basis points on Wednesday, ending a series of four consecutive hikes. of 75 basis points.
“It seems increasingly clear that inflation has reached a tipping point where price increases are slowing or have changed little for many categories of goods and services that consumers buy,” Christopher Rupkey, chief economist at FWDBONDS, said in New York.
“For the first time we can say that the Fed is winning its war against inflation.”
The consumer price index rose 0.1% last month after advancing 0.4% in October. Gasoline prices fell 2.0% after rising 4.0% in October. The cost of natural gas fell, as did the prices of electricity.
But food prices rose 0.5% after rising 0.6% in October. The cost of food consumed at home increased by 0.5%, driven by increases in the prices of fruit and vegetables, cereals and non-alcoholic beverages. But meat, fish and eggs cost less last month.
Economists polled by Reuters had expected the CPI to rise 0.3%. In the 12 months to November, the CPI rose 7.1%. It was the smallest advance since December 2021, and followed a 7.7% rise in October. The annual CPI peaked at 9.1% in June, the largest increase since November 1981.
US stocks opened higher. The dollar fell against a basket of currencies. US Treasury bond prices rose.
FIXED RENTS
Annual inflation is slowing in part because last year’s big increases are dropped from the calculation. The Federal Reserve’s aggressive monetary policy is also holding back demand.
Excluding the volatile food and energy components, the CPI rose 0.2% last month. It was the smallest increase in the so-called core CPI since August 2021 and followed a 0.3% rise in October. Core CPI was held back by used car and truck prices, which fell 2.9%, declining for the fifth straight month.
The prices of new vehicles and household furniture remained unchanged. Healthcare costs decreased by 0.5%, while airline ticket prices fell by 3%.
Despite declining prices for basic goods, which is also due to corporate discounts to attract cash-strapped Christmas shoppers and liquidate stocks against a backdrop of slowing demand and improving supply chains , rent stickiness keeps headline core inflation high.
Owners’ equivalent rent, a measure of how much owners would pay to rent or earn from renting out their property, rose 0.7% after rising 0.6% in October.
Although independent measures of rents suggest that rent inflation is moderating, this is not expected to be reflected in CPI data until next year.
In the 12 months to November, the so-called core CPI rose 6.0% after rising 6.3% in October. The Federal Reserve has an inflation target of 2%. Pressure is also coming from services, reflecting rising wages as the labor market remains tight.
Core inflation numbers remain high, so economists expect the Federal Reserve to continue tightening for a while, even if it eases the pace of rate hikes on Wednesday.
Core inflation numbers remain high, so economists expect the Federal Reserve to continue tightening for a while, even if it eases the pace of rate hikes on Wednesday.
Economists expect the Fed to raise its key interest rate to a level above the recently forecast 4.6%, where it could stay for some time. They expect the central bank to raise its estimate of the so-called terminal rate on Wednesday.
This year, the Federal Reserve has raised its official interest rate by 375 basis points, from a level close to zero.