Core inflation rose in the US and consumer prices unexpectedly rose in November, providing further evidence that the Federal Reserve is unlikely to move to cut interest rates early next year, Reuters reports.
The Labour Department’s Bureau of Labor Statistics said on Tuesday that the consumer price index rose 0.1 percent last month after being unchanged in October. In the 12 months through November, the consumer price index rose 3.1 percent after rising 3.2 percent in October.
Economists had forecast the consumer price index to be unchanged for the month, rising 3.1 per cent year-on-year. Annual consumer price growth has slowed from a peak of 9.1% in June 2022. Inflation remains above the Fed’s 2% target.
The report followed data released last Friday that showed job growth accelerated in November and the unemployment rate fell to 3.7% from a nearly two-year high of 3.9% in October. The strong jobs report caused financial markets to push back expectations for an interest rate cut to May from March, according to CME Group’s FedWatch tool.
US central bank officials will convene for a two-day policy meeting on Tuesday. The Fed is expected to leave rates unchanged on Wednesday, and economists are confident the policy tightening campaign is over. Veronica Clark, an economist at Citigroup in New York, said:
(Fed Chair Jerome) Powell will likely continue to guide that rate cuts are not yet being considered but will not substantially push back on market pricing.
The Fed raised the discount rate by 525 basis points to the current range of 5.25%-5.50% from March 2022.
Excluding the volatile food and energy components, the consumer price index rose 0.3 per cent in November after rising 0.2 per cent in the previous month. The so-called core CPI rose thanks to higher prices for used cars and trucks.
High rents continued to keep core inflation high. Rental inflation could slow significantly next year as vacancy rates in the rental sector rose to a more than two-year high in the third quarter and a large number of apartment buildings are under construction.
