U.S. inflation likely rose slightly last month, but not enough to deter further rate cuts from the Fed.
WASHINGTON– Annual inflation in the United States may have increased last month, a sign that price increases remain high even though they have fallen from the painful levels of two years ago.
Consumer prices were estimated to have risen 2.7% in November from 12 months earlier, according to a survey of economists by data provider FactSet, up from an annual figure of 2.6% in October. Excluding volatile food and energy costs, so-called core prices are expected to have increased by 3.3% compared to the previous year, the same level as the previous month.
The latest inflation figures are the last major data that Federal Reserve officials will review before meeting next week to decide on interest rates. A relatively moderate increase will probably not be enough to discourage the authorities from reducing their key rate by a quarter of a point.
The government will release the Consumer Price Index for November at 8:30 a.m. Eastern Time on Wednesday.
The Fed lowered its benchmark rate, which affects many consumer and business loans, by half a point in September and another quarter point in November. The cuts lowered the central bank’s policy rate to 4.6%, from a four-decade high of 5.3%.
Although inflation is now well below its peak of 9.1% in June 2022, average prices remain much higher than they were four years ago – a main source of public discontent this contributed to President-elect Donald Trump’s victory over Vice President Kamala Harris in November. Still, most economists expect inflation to continue falling next year toward the Fed’s 2% target.
Measured from month to month, prices would have increased by 0.3% from October to November. This would be the largest increase since April. Core prices are also expected to have increased by 0.3% for a fourth consecutive month. Among individual items, airfares, used car prices and auto insurance costs were all reported to have increased in November.
Fed officials have made clear that they expect inflation to fluctuate on a bumpy path, even as it gradually cools toward its target level. In their speeches last week, several central bank officials stressed that they believed that with inflation falling so far, there was no longer a need to keep their policy rate so high.
Typically, the Fed cuts rates to try to stimulate the economy enough to maximize employment, but not so much as to drive up inflation. But the American economy appears to be in good health. He grew up in a sustained rate of 2.8% annually in the July-September quarter, supported by healthy consumer spending. That led some Wall Street analysts to suggest that the Fed didn’t actually need to cut its benchmark rate further.
But Chairman Jerome Powell said the central bank was seeking to “recalibrate” its rate to a lower level, more in line with more moderate inflation. Furthermore, hiring has slowed down a bit in recent months, increasing the risk of a weakening of the economy in the months to come. Additional rate cuts by the Fed could offset this risk.
One possible threat to the Fed’s efforts to keep inflation low is Trump’s threat to impose widespread tariffs on U.S. imports — a move that economists say would likely drive up inflation. Trump has said he could impose tariffs of 10% on all imports and 60% on products from China. As a result, Goldman Sachs economists forecast that core inflation would rise to 2.7% by the end of 2025. Without tariffs, they estimate it would fall to 2.4%.
When the Fed’s meeting ends Wednesday, it won’t just announce its decision on interest rates. Policymakers will also release their latest quarterly projections for the economy and interest rates. In September, they forecast four rate cuts for 2025. Officials will likely reduce that number next week.
