November inflation rises at the slowest rate this year, beating expectations

Better-than-expected inflation figures for November’s consumer price index (CPI) mean the Fed is likely to slow growth at its next meeting, economists said. (iStock)

The annual rate of inflation continued to improve in November, registering the smallest monthly increase since the end of 2021, according to the latest report from the Bureau of Labor Statistics (BLS).

The Consumer Price Index (CPI), a measure of inflation, rose 7.1% year-on-year in November, slowing from a 7.7% increase in October. On a monthly basis, inflation rose 0.1% from October to November.

The increase was due to the increase in shelter and food prices, the report said. Shelter spending continued to rise sharply, up 0.6% in November. The food index rose 0.5% in November, following an increase of 0.6% in October. The food-at-home index also rose 0.5% in November.

But gas prices fell by 2% in November following a 4% increase in October. The energy index fell 1.6% in November after rising 1.8% in October.

“Both topline and core CPI inflation slowed in November, indicating some progress in the ongoing struggle to contain inflation,” said Morning Consult economic analyst Kayla Brune. “For many categories, he says, price levels remain much higher than a year ago, and these higher prices are putting pressure on household budgets and forcing trade-offs with purchasing decisions.

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“Morning Consult’s data suggests that price pressures are likely to continue to ease amid softer demand for a variety of goods and services,” Brune continued.

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The Fed is expected to raise interest rates at its next meeting

Inflation is now down two percentage points from a peak of 9.1% annual growth in June. The better inflation numbers are a welcome and hopeful sign for policymakers and are likely to boost the chances that the Federal Reserve will slow rate hikes at its next December meeting, according to two economists.

In November, the Fed raised rates by 75 basis points, marking the sixth rate hike this year, citing still-high inflation numbers as a reason to continue with its aggressive monetary policy. The Fed has set an inflation target of 2%.

“The Federal Reserve is expected to raise the fed funds rate by 50 basis points tomorrow, a departure from aggressive consecutive hikes over the past four meetings,” Credit Union National Association (CUNA) senior economist David Kebede said on Tuesday. The CPI report shows that price trends are moving in the right direction although inflation is still well above target.

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The low inflation numbers should also give the Fed “reassurance that it is not premature to pull back the pace of their tightening,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors.

“For consumers, any improvement is welcome news for spending budgets that have tightened significantly over the past year, putting pressure on discretionary spending and continuing concerns for low-income households and especially those on fixed incomes,” Byrd continued. kept

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The next concern is the potential for recession

The latest CPI showed that inflation may have peaked, but Baird warned that the next challenge for the US economy is a possible recession.

“There is growing evidence that the worst of inflation fears may be in the rearview mirror,” Baird said. “There is the possibility of a recession on the horizon — the next crisis on the road that policymakers will need to navigate around or potentially in the economy.”

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Baird said the combination of rising layoffs and a slowdown in new job creation paints a real possibility that the U.S. economy is slowing.

According to the latest jobs report from the Bureau of Labor Statistics (BLS), the economy added 263,000 jobs in November and the unemployment rate remained at 3.7%, unchanged from October. Fitch Ratings said job losses are expected to increase in 2023, according to its unemployment forecast.

“Lower inflation is good news for the Fed, but it’s too soon for policymakers to take a victory lap,” Baird said. “If inflation has been the frying pan, the prospect of a recession is the fire to which consumers and investors alike are likely to turn their attention in the coming months.”

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