In the latest report from the Bureau of Labor Statistics, US consumer inflation has experienced a sequential acceleration, aligning with Wall Street's expectations amidst rising food and energy prices. Notably, the consumer price index (CPI) climbed by 0.3% in November, up from 0.2% over the previous four months.
Annually, inflation rose from October's 2.6% to 2.7%, with both metrics on par with forecasts derived from a Bloomberg survey. Core inflation, which excludes the often-volatile food and energy sectors, remained steady at 0.3% for November, matching October's figure. Annually, core inflation stood at 3.3%, consistent with consensus estimations. Thomas Feltmate, a senior economist at TD Economics, noted, "The November CPI report provided further evidence that inflation progress is becoming much more incremental, suggesting the Federal Reserve's battle to return to a 2% inflation rate is far from over." Feltmate remarked that the markets have fully accounted for an anticipated 25-basis-point interest rate cut in the upcoming Federal Open Market Committee meeting.
On Wednesday, the probability of this quarter-point reduction soared to approximately 96%, up from nearly 89% the previous day, as indicated by the CME FedWatch tool. However, with inflation showing signs of stalling and some proposals from incoming administration—such as potential tariffs and tax cuts—likely to exacerbate inflationary pressures, it's expected that the Federal Reserve will adopt a more cautious approach in the pace of rate cuts as they navigate through 2025.
President-elect Donald Trump is anticipated to take office on January 20. In November, food prices saw a significant increase of 0.4%, up from 0.2% in the previous month. Energy prices followed suit with a 0.2% rise after remaining flat in October. This rise in energy costs was marked by a notable 0.6% uptick in gasoline prices.
Over the year, food prices increased by 2.4%, while the energy index saw a decrease of 3.2% according to official data. On the other hand, the growth in shelter costs has slowed down to 0.3%, down from 0.4% in October, reflecting a 4.7% rise on an annual basis. This marks the smallest year-over-year increase since February 2022. Feltmate described the easing in shelter inflation as "at least one piece of encouraging news, particularly after having unexpectedly escalated in October.".