As was widely expected, U.S. inflation ticked up again in November with the average prices on consumer goods and services up 2.7% from a year ago, a rise of 0.1% from October’s annual rate and 0.3% from September’s 12-month reading.
Wednesday’s Consumer Price Index report from the U.S. Labor Department finds the shelter index rose 0.3% on a monthly basis in November and accounted for nearly 40% of the monthly all items increase. The CPI shelter index, which captures housing-related costs by gathering data on rental prices and rental equivalency rates for owner-occupied housing, was up 4.7% on an annual basis in November. The metric accounts for about one-third of the total CPI calculation.
Core CPI inflation, which strips out volatile food and energy prices, came in at 3.3% for the past 12 months, matching October’s annual core rate.
Both the overall reading and core inflation rate for November matched Dow Jones consensus estimates released ahead of the report.
Grocery and gas prices
Grocery prices rose sharply in November, up 0.5% from October and are now 1.6% higher than last year. Prices on food purchased away from home ticked up 0.3% on a monthly basis in November and are 3.6% higher than 12 months ago.
Gasoline prices across the country jumped 0.6% last month but are still down over 8% from November 2023. And, overall energy prices were down 3.2% on an annual basis.
The average price of a gallon of regular across Utah was $3 on Wednesday, unchanged over the last week but down 18 cents a gallon from a month ago, according to the latest data from AAA.
The Mountain West group of states, which include Utah, had the lowest regional inflation in the country in November with overall prices up 1.7% from a year ago but the reading rose 0.3% from October’s annual rate.
Inflation proving sticky
Wednesday’s CPI data release is the last major federal economic report ahead of the Federal Reserve’s final policy meeting of the year next week. While the Labor Department’s latest assessment reflects U.S. inflationary pressures that are proving sticky, and still well north of the Fed’s target rate of 2% annual inflation, most economists are still predicting the monetary body will levy another reduction to its benchmark interest rate.
“In-line core inflation clears the way for a rate cut at next week’s (Federal Open Market Committee) meeting,” Whitney Watson, global co-head and co-CIO for fixed income at Goldman Sachs Asset Management, told CNBC. “Following today’s data the Fed will depart for the holiday break still confident in the disinflation process and we think it remains on course for further gradual easing in the new year.”
The latest report follows the release of the October personal consumption expenditures report from the Commerce Department late last month that pegged annual inflation at 2.3%. The rate was up 0.2% on a monthly basis, which matched the annual uptick from September’s 2.1%. The PCE assessment is the Fed’s preferred source for tracking U.S. inflation.
The Personal Consumption Expenditures index tracks prices on a representative basket of goods and services similar to the Labor Department’s more mainstream inflation measure, the Consumer Price Index. But while the CPI price tracking is based on consumer survey results, the PCE looks at data on goods and services sold by businesses.
What’s next for the Fed?
The Fed will consider the new data and a wide range of metrics at its next policy meeting, scheduled for Dec. 17-18. The monetary body has shifted its policy focus over the last few months from quelling inflation to bolstering a slowing U.S. jobs sector and levied two straight reductions to its benchmark interest rate. Fed Chairman Jerome Powell recently said there is consensus among the body’s board of governors that U.S. inflation is “moving reliably” toward the target goal of 2%.
At its November policy meeting, the Fed followed up on its September decision to cut its intra-bank overnight lending rate by 0.5% by levying an additional 0.25% reduction and bringing the federal funds rate into the 4.5% to 4.75% range.
Before the September reduction, the first in four years, the Fed’s rate had stood at 5.25% to 5.5% since last summer and was the highest in 23 years after a series of 11 straight increases levied earlier by the monetary body in its efforts to quash inflation.