U.S. consumer prices posted their largest monthly increase in seven months, rising 0.3% in November, driven by shelter and food costs, according to the Labor Department. Despite the inflation uptick, rents—a critical component of shelter costs—rose at their slowest pace in over three years, suggesting a potential cooling trend. Economists remain cautious, pointing to lingering inflationary pressures and upcoming tariffs from the incoming Trump administration as potential headwinds for the Federal Reserve's rate cut plans next week.
The core Consumer Price Index (CPI), which excludes volatile food and energy prices, also rose 0.3%, marking a steady pace for the fourth consecutive month. Year-over-year, the core CPI gained 3.3%, matching October’s figure. While food prices surged, led by eggs and beef, rents and motor vehicle insurance costs showed moderation. Analysts noted that sustained improvements in services inflation would be critical for the Fed to continue its easing trajectory.
Market Overview:- Consumer Price Index rose 0.3% in November, its highest monthly increase since April.
- Core CPI remained steady at a 3.3% year-on-year increase.
- Rents showed their slowest gain in over three years, offering a glimmer of hope.
- Food prices surged 0.4%, driven by higher costs for eggs and beef.
- Shelter costs, accounting for 40% of CPI gains, rose 0.3%.
- Upcoming tariffs from the Trump administration could pressure inflation further.
- Federal Reserve expected to deliver a quarter-point rate cut next week.
- Economists forecast slower inflation in 2025 as rents cool and labor slack grows.
- Producer price data due Thursday may adjust inflation expectations.
Investors reacted positively to signs of stabilization in core inflation metrics. Stocks edged higher, the dollar strengthened, and Treasury yields dipped. While markets are pricing in a 25-basis-point rate cut at the Fed's December meeting, analysts caution that higher tariffs and labor market uncertainties could challenge the central bank’s policy outlook heading into 2025. The Fed's summary of economic projections, due next week, will shed more light on policymakers’ plans.
