U.S. inflation rose slightly last month, helped by higher prices for used cars, hotel rooms and groceries, in the latest sign that some price pressures remain high.
Consumer prices rose 2.7% in November from a year earlier, compared to the annual figure of 2.6% in October. Excluding volatile food and energy costs, core prices rose 3.3%, the same level as the previous month. Measured on a monthly basis, prices rose 0.3% from October to November, the largest such increase since April. Core prices also rose by 0.3% for the fourth month in a row.
The Labor Department’s inflation numbers released on Wednesday are the last major piece of data that Federal Reserve officials will consider before they meet next week to decide on interest rates. The relatively moderate increase in November is unlikely to be enough to dissuade officials from cutting the key interest rate by a quarter of a percentage point. The probability of an interest rate cut next week, as perceived by Wall Street traders, rose to 98% after the release of the inflation report on Wednesday, according to futures pricing tracked by CME FedWatch.
“It’s generally within the range of what the Fed would like to see,” said Jason Pride, chief investment strategist at Glenmede Wealth Management.
Although sharp increases in items such as groceries and hotel rooms boosted overall inflation last month, these categories are often volatile. Pride noted that the cost of services, such as rents, car insurance and airline ticket prices, fell in November.
Last week, Federal Reserve Chairman Jerome Powell suggested that with the overall economy healthy, the Fed could slowly lower its key interest rate.
“We are not quite there on inflation, but we are making progress,” Powell said. “We can be a little more careful.”
As the labor market slows, growth in Americans’ wages has slowed from an annual pace of nearly 6% in 2022 to about 4% now, a rate that is barely in line with inflation at the Fed’s 2% target. Powell said he does not believe the current job market is the driver of higher prices.
Randy Carr, CEO of World Emblem, a maker of patches, tags and badges for businesses, universities and law enforcement agencies, said he is offering smaller pay increases, in the 3% to 5% range, than his company did during the height of economic inflation.
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“Things have stabilized somewhat,” he added.
Carr’s customers, including the company that makes uniforms for UPS, generally won’t accept price hikes of more than 2% a year. So World Emblem aims to offset its higher wage costs by increasing efficiency in manufacturing.
In September, the Fed cut its benchmark interest rate, which affects many consumer and business loans, by a large half-percentage point. The move was followed by a quarter-point rate cut in November. These cuts reduced the central bank’s key interest rate to 4.6%, down from its highest level in four decades of 5.3%.
Although inflation is now well below its peak of 9.1% in June 2022, average prices are still about 20% higher than they were three years ago — a major source of public discontent that helped lead President-elect Donald Trump to victory. Vice President Kamala Harris. In November.
Grocery prices jumped last month, an uncomfortable reminder to consumers that food prices remain a major drag on household budgets. Beef prices jumped just 3.1% from October to November, and were up 5% from a year earlier.
Egg prices, which have been volatile for more than two years, partly due to the bird flu outbreak, rose by 8.2% in just the past month. It is approximately 38% higher than last year.
Gas prices rose 0.6% from October to November, ending a series of declines. However, gas was down more than 8% from the previous year. Hotel prices jumped 3.2% from October to November, which is 3.7% higher than last year.
Used car prices jumped by 2% from October to November; New cars rose by 0.6%. These increases may have been driven by higher demand after Hurricane Helen destroyed cars in places like North Carolina.
But one of the main categories pushing prices higher showed welcome signs of slowing in November: Rental prices rose just 0.2%, the smallest increase since July 2021. A measure of housing costs also rose just 0.2%, the smallest rise since April. 2021.
Fed officials have made clear that they expect inflation to fluctuate along a bumpy path even as it gradually slows toward the target level. In their speeches last week, several central bank policymakers reiterated their belief that with inflation already low so far, it is no longer necessary to keep the benchmark interest rate quite high.
Typically, the Fed lowers interest rates in an attempt to stimulate the economy enough to maximize employment but not so much as to raise inflation. But the US economy appears to be in a strong position. It grew at a rapid annual pace of 2.8% in the July-September quarter, supported by healthy consumer spending. This has prompted some Wall Street analysts to suggest that the Fed does not actually need to cut its key interest rate further.
But Powell said the central bank was seeking to “recalibrate” the interest rate to a lower level, which is consistent with lower inflation.
One potential problem with the Fed’s efforts to keep inflation low is Trump’s threat to impose broad tariffs on U.S. imports — a move economists say is likely to send inflation higher. Trump said he may impose tariffs of 10% on all imports and 60% on goods coming from China. As a result, economists at Goldman Sachs expect core inflation to reach 2.7% by the end of 2025. Without the tariffs, they estimate that inflation would fall to 2.4%.
World Emblem, based in Hollywood, Florida, has factories in Georgia and California, but makes about 60% of its products in Mexico. President-elect Donald Trump has threatened to impose heavy tariffs on imports from Mexico. Carr, the company’s CEO, said he would try to offset the impact of the tariffs through a combination of price increases and research and development cuts.
“I hope we don’t have to deal with it, but if we have to, we’re making plans together,” he said.
