US Inflation Ticks Up as Some Price Pressures Remain Persistent
WASHINGTON – Fueled by increased costs in used cars, hotel accommodation, and groceries, inflation in the United States rose slightly in November, indicating that some price pressures continue to be elevated.
Consumer prices increased by 2.7% in November compared to a year earlier, up from 2.6% in October. When volatile food and energy costs are excluded, core prices rose 3.3%, consistent with the previous month. Month-to-month, prices jumped 0.3% from October to November, marking the largest increase since April. Core prices also rose by 0.3% for the fourth consecutive month.
The inflation figures reported by the Labor Department are the last significant data point that Federal Reserve officials will consider before their meeting next week to determine interest rates. The relatively mild rise in November is unlikely to deter officials from reducing their key rate by a quarter-point, with the chance of a rate cut climbing to 98% after the report was released, according to futures pricing tracked by CME FedWatch.
The Fed reduced its benchmark rate significantly by half a point in September and by a quarter-point in November, lowering the key rate to 4.6% from a four-decade high of 5.3%.
Although inflation is now significantly below its peak of 9.1% in June 2022, average prices remain about 20% higher than they were three years ago, which has been a major source of frustration for the public.
Grocery prices surged last month, a stark reminder for consumers that food costs continue to pressure household budgets. Beef prices rose by 3.1% just from October to November and have increased 5% compared to a year ago.
Egg prices, which have seen volatility over the past two years due to bird flu outbreaks, spiked 8.2% last month and are nearly 38% higher than a year earlier.
Gas prices increased by 0.6% from October to November, breaking a chain of declines; however, gas prices are down more than 8% compared to a year ago. Hotel prices climbed by 3.2% from October to November and are 3.7% higher than one year ago.
A key category that has generally driven prices up, rental prices, displayed encouraging signs of moderation in November, escalating only 0.2%, the smallest increase since July 2021. A measure of housing costs also rose 0.2%, the mildest rise since April 2021.
Federal Reserve officials anticipate that inflation will continue to fluctuate while gradually moving towards their target level. In recent speeches, several central bank policymakers emphasized their belief that with inflation already declining significantly, it may no longer be necessary to maintain their benchmark rate as high.
Typically, the Fed lowers rates to stimulate economic growth enough to maximize employment without causing inflation to rise excessively. However, the U.S. economy appears to be in solid condition, having grown at a robust 2.8% annual rate in the July-September quarter, aided by healthy consumer spending. Some analysts on Wall Street suggest that the Fed may not need to implement further rate cuts.
Still, Chair Jerome Powell has indicated that the central bank is aiming to “recalibrate” its rate to align with milder inflation. Additionally, hiring has moderated in recent months, increasing the risk of economic slowdown in the upcoming months, thereby making further rate cuts by the Fed a possible counterbalance to that risk.
One potential challenge to the Fed’s goal of containing inflation is the threat of widespread tariffs on U.S. imports, which could drive prices higher. Proposed tariffs include a 10% tax on all imports and up to 60% on goods from China. Economists predict that such tariffs could push core inflation to 2.7% by the end of 2025. Without them, the estimate for core inflation would drop to 2.4%.
At the conclusion of its meeting, the Fed is expected not only to announce its interest rate decision but also to issue updated quarterly projections for the economy and interest rates. In September, the Fed forecasted four rate cuts for 2025, a figure likely to be adjusted downward next week.
