Janice R. Andrews
Consumer Prices Rise Again in November
US consumer inflation ticked up for the second month in a row in November, primarily due to higher housing and food prices, according to data released by the Labor Department on Wednesday. The Consumer Price Index (CPI) increased by 2.7% year-over-year, a slight rise from 2.6% in October, matching economists’ expectations.
On a monthly basis, inflation rose by 0.3%, largely driven by persistent housing costs. Additionally, other categories such as food, energy, medical care, and recreation also saw price increases.
This back-to-back rise in inflation complicates the Federal Reserve’s goal of reducing inflation to its long-term target of 2%. The central bank, which recently began cutting interest rates from a 20-year high, may slow the pace of rate cuts in the coming months.
Fed’s Rate Cut Plans in Question
The Fed’s current benchmark lending rate stands at 4.50%-4.75%, after several cuts since September. Financial markets largely expect the central bank to implement another quarter-point reduction at its next meeting, which will be the final decision before President Joe Biden hands over the reins to incoming Republican President Donald Trump.
CMC Markets chief market analyst Jochen Stanzl noted, “The data suggests that progress towards lower inflation is stalling. The Fed may pause after next week’s meeting to reassess, especially since the labor market is still strong.”
Resilient Labor Market and Strong Economic Growth
Despite high interest rates, the US labor market has remained resilient, with low unemployment and continued hiring. This strong performance, combined with solid economic growth, provides the Fed with room to pause rate cuts as it evaluates the effectiveness of its anti-inflation efforts.
However, the recent reversal in inflation trends presents a challenge for the incoming Trump administration, which prioritized tackling inflation and reducing the cost of living during its campaign.
Core Inflation Also Stays Elevated
Core inflation, which excludes volatile food and energy prices, rose by 3.3% year-over-year in November and 0.3% from October. These figures were in line with economists’ expectations, further highlighting ongoing pressure on prices.
The latest inflation figures underscore the challenges the Federal Reserve faces in balancing economic growth with inflation control. With markets closely monitoring the situation, the Fed’s next moves will play a crucial role as the new administration takes over.
