November’s price rally was weaker than expected and is the latest sign that the runaway inflation that has weighed on the economy is beginning to ease.
The consumer price index, which measures a broad basket of goods and services, rose just 0.1 percent from the previous month and 7.1 percent from a year ago, the Labor Department reported Tuesday. We expected a 0.3% rise and a 12-month interest rate of 7.3%.
The year-on-year rise was well above the Federal Reserve’s healthy inflation target of 2%, but it was the lowest since November 2021.
Excluding volatile food and energy prices, the so-called core CPI rose by 0.2% on a monthly basis and 6% on an annual basis, compared with respective estimates of 0.3% and 6.1%.
Stocks initially surged following the report, with futures tracking the Dow Jones Industrial Average initially gaining more than 800 points before easing a bit. The Dow climbed about 275 points in his first hour of trading.
“Lower inflation will boost markets and ease pressure on the Fed to raise rates, but most importantly, higher inflation is hurting the public economy,” said Robert Frick, a corporate economist at the U.S. Navy Federal Credit Union. It means real relief for Americans.” “This is especially true for low-income Americans, who are disproportionately hit by inflation.”
Falling energy prices kept inflation in check. The energy index fell 1.6% for him over the month, partly because gasoline fell 2% for him. However, food prices rose by 0.5%, up 10.6% from a year ago. Despite monthly declines, the Energy Index has seen him rise 13.1% since November 2021.
Shelter costs, which account for about one-third of the consumer price index, continue to rise, rising 0.6% month-on-month and are now up 7.1% on an annual basis.
The easing of inflationary pressures has helped lift workers after months when wage gains were well below inflation. His real average hourly earnings went up 0.5% that month, but he’s down 1.9% from a year ago.
The CPI report comes on the same day that the Federal Open Market Committee, which sets interest rates, begins its two-day meeting. Markets are widely expecting the FOMC to announce his half-point rate hike on Wednesday regardless of Tuesday’s CPI reading.
“While the Fed can dismiss October’s better-than-expected results as just one month of data, a further slowdown in November is likely due to this,” said Paul Ashworth, chief North American economist at Capital Economics. It makes the new disinflationary trend difficult to clean up.” CPI Note “Stick a fork in it, inflation done”.
Inflation spiked in spring 2021. This is the convergence of factors that have pushed inflation to its highest level since his stagflation days in the early 1980s. Among the major exacerbations were the supply-demand imbalance brought on by the pandemic, Russia’s invasion of Ukraine and its impact on energy prices, and trillions of dollars in fiscal and monetary stimulus. supply chain issues.
Used car prices, which were the main driver of the early rise in inflation, fell 2.9% in a month and are now down 3.3% from a year ago. As recently as February, the used car and truck index saw him jump more than 40% on an annual basis. This is a result of increased demand due to a backlog of new car production due to a shortage of microchips.
Healthcare costs also decreased by 0.7% on a monthly basis and increased by 4.4% on an annualized basis.
Headline CPI peaked at around 9% in June 2022 and has been in a slow but steady decline since then.
After spending months dismissing the spike in inflation as “temporary,” Fed officials began raising rates in March. The central bank has raised its short-term borrowing rate a total of six times, pushing the benchmark into his 3.75%-4% target range.
Fed Chairman Jerome Powell recently said a key factor in determining future monetary policy moves will be looking at service inflation, excluding the cost of shelter. almost unchanged from a year ago, up nearly 7.3% from a year ago.
