U.S. inflation ticked up last month

Inflation in the United States saw a slight increase last month, driven primarily by rising prices in used cars, hotel accommodations, and auto insurance. However, the inflation rate remains significantly lower than its peak recorded two years ago.

In November, consumer prices increased by 2.7% compared to the same month the previous year, a slight rise from the 2.6% annual figure reported in October. When excluding the often volatile food and energy sectors, core prices also experienced a 3.3% increase, maintaining the same rate seen in the prior month.

Month-over-month, from October to November, consumer prices rose by 0.3%, marking the highest monthly increase since April. Core prices also maintained their trend, rising by 0.3% for the fourth consecutive month.

The recent inflation data released by the Labor Department is crucial for Federal Reserve officials, who will use this information during their upcoming meeting to make decisions regarding interest rates. The relatively modest increase in inflation is unlikely to deter officials from reducing the key interest rate by a quarter-point, as anticipated by most economists and Wall Street traders.

In recent months, the Fed has already implemented significant cuts to its benchmark interest rate, with a half-point reduction in September followed by a quarter-point drop in November. This adjustment has brought the central bank’s key rate down to 4.6%, reversing from a peak of 5.3%, the highest level in four decades.

While inflation has significantly decreased from its peak of 9.1% in June 2022, prices remain approximately 20% higher than they were three years ago. This continuing rise in living costs is a prominent concern among the public and has contributed to broader political sentiments. Nonetheless, many economists maintain an optimistic outlook and predict that inflation rates will continue to decline toward the Federal Reserve’s target of 2% over the course of the next year.