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Highlights
- US inflation reaches an annual rate of 2.7% in November, the highest since July.
- Shelter and food costs continue to drive inflationary pressures.
- Core inflation remains steady at 3.3%, influencing Federal Reserve discussions.
Inflation in the United States rose to an annual rate of 2.7% in November, slightly up from the previous month's 2.6%. According to data from the Consumer Price Index (CPI) released by the Bureau of Labor Statistics, the monthly increase stood at 0.3%, marking the highest annual inflation rate since mid-year. These figures have aligned with market forecasts, leading to heightened expectations for a potential Federal Reserve rate cut during its upcoming December policy meeting.
The Federal Reserve has maintained its focus on combating inflation since 2022 through rate adjustments, which have significantly lowered CPI from its peak of 9.1%. However, the Fed’s target of 2% inflation might remain elusive in the short term due to persistent price pressures in "sticky" categories like shelter, utilities, and childcare. Core CPI, which excludes volatile food and energy prices, held steady at 3.3% for the fourth consecutive month, further bolstering rate cut projections.
Key Drivers of Inflation
Shelter costs, which account for a significant portion of CPI, rose by 0.3% in November, contributing nearly 40% to the monthly increase. While this impact is slightly reduced compared to earlier in the year, annual shelter inflation still sits at 4.7%. Similarly, food prices climbed 0.4% for the month, with notable spikes in grocery staples. Egg prices surged 8.2%, marking a 37.5% annual increase influenced by avian flu effects and seasonal demand.
Energy costs reversed their six-month downward trend, inching up 0.2% in November. Meanwhile, vehicle prices also rose, with used car prices jumping 2% and new car prices increasing by 0.6%. This broad inflationary pressure across multiple sectors underscores ongoing challenges in achieving the Fed’s inflation goals.
Market Reactions and Forward Outlook
The CPI data sparked limited market reactions, with the US dollar index edging higher by 0.15% and S&P 500 futures gaining modestly. Core inflation’s stability suggests room for the Federal Reserve to pivot toward supporting economic growth rather than solely focusing on inflation reduction. With inflation no longer accelerating, the stage appears set for strategic rate decisions.
While inflation has eased significantly compared to its peak, challenges persist heading into 2025. Factors such as new policy measures and global economic shifts could impact inflation trends, presenting a complex landscape for policymakers. As discussions around rate adjustments continue, sectors like utilities (ASX:APA) and transportation (ASX:QAN) may feel indirect effects from evolving monetary strategies.
