American consumer prices witnessed the most notable rise in seven months during November, but expectations of the Federal Reserve on a third-straight interest rate cut to bolster a softening job market are still in sight.
Stagnation indicates that the central bank’s attempts to reduce inflation to their 2% target encounter increasing difficulty, as confirmed by the Labor Department Wednesday, which highlighted no progress has been made in mitigating core price pressures over the last quarter of the year.
Yet, there were rays of optimism; the cost increase rate for rents, recognized as one of the more inflexible inflation components, saw the slowest growth in over three years. Coupled with a tempering increase in motor vehicle insurance, this assisted in decelerating service inflation growth.
Such a maintained downward trend could positively impact future inflation predictions, however, impending tariffs from the incoming Trump administration could spell trouble. Market expectations for a quarter-point rate cut from the Fed next week are now above 96%, a significant increase from the 86% likelihood prior to this data release.
Meanwhile, the yield on the critical U.S. 10-year notes surged by 5.2 basis points to reach 4.271%. The consumer price index (CPI) climbed by 0.3% within the month, outpacing the 0.2% growth seen over four successive months, as reported by the Bureau of Labor Statistics.
Over a third of the CPI spike was due to a 0.3% shelter cost hike; a significant contributing factor was a 3.7% leap in hotel and motel room fees. As for food prices, they saw a 0.4% acceleration following a 0.2% increase in October, spurred mainly due to an 8.2% rocketing in egg prices amid the avian flu.
The overall CPI went up 2.7% over the year to November, slightly above the 2.6% rise the previous month, aligning with economic forecasts.
