Inflation in the United States increased somewhat last month, driven by higher prices for groceries, hotel rooms, and used cars. This is the most recent indication that some pricing pressures are still significant.
In November, consumer prices increased 2.7% over the previous year, up from a 2.6% annual increase in October. So-called core prices rose 3.3%, the same as the previous month, excluding volatile food and energy expenses. Prices increased by 0.3% month over month from October to November, the largest increase since April. For the fourth consecutive month, core prices also increased by 0.3%.
The last significant piece of information that Fed officials will take into account before their meeting next week to determine interest rates is Wednesday’s inflation data from the Labor Department. The policymakers’ decision to lower their benchmark rate by a quarter-point is probably not going to be deterred by the comparatively small increase in November. According to futures pricing monitored by CME FedWatch, the likelihood of a rate drop next week, as anticipated by Wall Street traders, increased to 98% following the release of Wednesday’s inflation report.
Jason Pride, chief investment strategist at asset management company Glenmede, stated that it’s generally in the ballpark of what the Fed would want to see.
Even though last month’s overall inflation was raised by steep rises for things like groceries and hotel rooms, such sectors are frequently unstable. Pride observed that in November, the price of items including rent, auto insurance, and airfare decreased.
Fed Chair Jerome Powell said last week that the Fed may gradually lower its benchmark rate because the economy is doing well overall.
Powell stated, “We’re making progress, but we’re not quite there on inflation.” A bit more caution is something we can afford.
Payroll growth for Americans has decreased from a roughly 6% annual pace in 2022 to about 4% at the current rate due to the cooling labor market. This rate is almost in line with inflation at the Fed’s 2% target. Powell has stated that he does not believe that the present state of the labor market is causing prices to rise.
According to Randy Carr, CEO of World Emblem, a company that produces patches, labels, and badges for businesses, academic institutions, and law enforcement organizations, he is giving wage increases that are less substantial than those his company offered during the peak of inflation, ranging from 3% to 5%.
He claimed that things had somewhat settled off.
Customers of Carr’s, including the company that manufactures UPS uniforms, typically refuse price increases of more than 2% annually. Therefore, World Emblem wants to increase manufacturing efficiency in order to offset the expense of its higher pay.
The Fed cut its benchmark rate, which influences a large number of business and consumer loans, by a significant half-point in September. In November, it followed that action with a quarter-point rate decrease. The central bank’s key rate dropped from a four-decade high of 5.3% to 4.6% as a result of those cutbacks.
Average prices are still 20% higher than they were three years ago, despite the fact that inflation is now far below its peak of 9.1% in June 2022. This is a major source of popular dissatisfaction that contributed to President-elect Donald Trump’s triumph over Vice President Kamala Harris in November.
The increase in grocery prices last month served as an unsettling reminder to customers that food costs continue to be a significant financial burden on households. Prices for beef increased 3.1% between October and November alone, and they are up 5% from the previous year.
Just last month, egg prices, which have been erratic for over two years due in part to avian flu outbreaks, surged 8.2%. Compared to a year earlier, they have increased by almost 38%.
After a series of drops, gas prices increased by 0.6% between October and November. However, compared to a year ago, gas has decreased by more than 8%. From October to November, hotel rates increased by 3.2%, and they are now 3.7% more expensive than they were a year ago.
New car costs increased by 0.6% between October and November, while used car prices increased by 2%. A spike in demand following Hurricane Helene’s devastation of pre-existing automobiles in states like North Carolina may have contributed to those increases.
However, in November, a significant category that has been driving up prices showed encouraging signs of cooling: The smallest increase in rental prices since July 2021 was a mere 0.2%. Additionally, housing costs increased by just 0.2%, which is the lowest increase since April 2021.
Even as inflation slowly cools toward their goal level, Fed officials have stated that they anticipate it to follow a rocky road. Several of the central bank’s policymakers emphasized in speeches last week that they no longer saw the need to maintain their benchmark rate at such a high level because inflation had already started to decline.
The Fed usually lowers interest rates in an effort to boost the economy just enough to increase employment without raising inflation. However, the American economy seems to be doing well. In the July–September quarter, it expanded at a robust 2.8% annual rate, supported by robust consumer expenditure. Because of this, several analysts on Wall Street have said that the Fed doesn’t really need to lower its key rate any further.
Powell, however, has stated that the central bank is attempting to rebalance its rate to a lower level, one that is more consistent with containing inflation.
Trump’s promise to slap extensive taxes on U.S. imports, which economists think would likely raise inflation, is one potential obstacle to the Fed’s efforts to control inflation. According to Trump, he might apply 60% tariffs on Chinese goods and 10% duties on all imports. Because of this, Goldman Sachs economists predict that by the end of 2025, core inflation will be 2.7%. They predict that it would fall to 2.4% in the absence of tariffs.
Despite having facilities in Georgia and California, World Emblem, a company headquartered in Hollywood, Florida, produces over 60% of its goods in Mexico. Donald Trump, the incoming president, has vowed to put high tariffs on Mexican goods. The CEO of the company, Carr, stated that he would attempt to counteract the effects of tariffs by reducing R&D and raising prices.
“We’re making plans if we have to deal with it, but I wish we didn’t have to,” he said.
— The Associated Press’ Christopher Rugaber
Note: Every piece of content is rigorously reviewed by our team of experienced writers and editors to ensure its accuracy. Our writers use credible sources and adhere to strict fact-checking protocols to verify all claims and data before publication. If an error is identified, we promptly correct it and strive for transparency in all updates, feel free to reach out to us via email. We appreciate your trust and support!
