US Records 3.1% Annual Rate in November, Eased by Cheaper Gasoline

US Inflation Stabilizes at 3.1% in November: Gasoline Prices Counter Housing and Service Increases

The annual inflation rate in the United States registered at 3.1% in November, experiencing a slight decline from the 3.2% recorded in October.

The moderation in inflation was primarily attributed to the reduction in gasoline prices, which offset increases in housing and car insurance costs, consequently alleviating pressure on the Federal Reserve.

Monthly Adjustments:

According to the Consumer Price Index (CPI) figures released by the US Bureau of Labor Statistics on Tuesday, the inflation gauge witnessed a marginal 0.1% increase from October on a monthly basis.

Federal Reserve’s Focus:

This inflation update precedes the Federal Reserve’s final two-day policy meeting of 2023, with investors keenly observing for hints regarding potential rate cuts.

The central bank is anticipated to maintain interest rates for the third consecutive time, but analysts are scrutinizing the data for insights into future monetary policy decisions.

Core Inflation Dynamics:

While the headline inflation figure experienced a slight decline, the core inflation measure, excluding volatile food and energy items, remained resilient at 4% year-on-year.

This robustness in core inflation may influence the Fed’s considerations for potential rate cuts in the early part of the following year.

Market Reactions and Analyst Perspectives:

Stocks initially saw a dip in response to the inflation data, with Wall Street assessing its implications for the Fed’s future actions.

However, by late morning, most losses had been recovered, and major indices like the S&P 500, Dow Jones Industrial Average, and Nasdaq turned positive.

Analysts suggest that the core services inflation, particularly in shelter and non-shelter services, remains a concern, posing challenges to achieving the sustained downward trajectory desired by the Federal Reserve.

Sector-Specific Inflation Trends:

Shelter prices, comprising rent and accounting for a significant portion of the CPI weighting, increased by 0.4% on a monthly basis and 6.5% on a 12-month basis. Despite overall moderation in inflation, specific sectors experienced notable price increases, such as motor insurance, motor vehicle maintenance, repair, and sporting event admissions.

President Biden’s Response:

Following the inflation report, President Biden acknowledged the progress in bringing down inflation and lowering costs for American families. He emphasized the ongoing efforts to address affordability challenges, including healthcare costs and utility bills.

Fed’s Likely Course of Action:

The mixed signals in Tuesday’s inflation report are anticipated to maintain the Federal Reserve’s current stance, likely leaving the benchmark interest rate unchanged at the conclusion of its latest meeting. The Fed’s series of rate hikes since March 2022 have contributed to increased borrowing costs across various sectors, impacting mortgages, auto loans, and business borrowing.