US consumer prices post largest gain in seven months in November

WASHINGTON - US consumer prices increased by the most in seven months in November, but that is unlikely to discourage the Federal Reserve from cutting interest rates for a third time next week against the backdrop of a cooling labour market.

The consumer price index rose 0.3 per cent in November, the largest gain since April after advancing 0.2 per cent for four straight months, the Labour Department’s Bureau of Labour Statistics said on Dec 11. In the 12 months through November, the CPI climbed 2.7 per cent after increasing 2.6 per cent in October.

Economists polled by Reuters had forecast the CPI rising 0.3 per cent and advancing 2.7 per cent year on year.

The annual increase in inflation has slowed considerably from a peak of 9.1 per cent in June 2022. Nonetheless, progress in lowering inflation down to the US central bank’s 2 per cent target has virtually stalled in recent months.

The Fed is, however, now more focused on the labour market. Though job growth accelerated in November after being severely restricted by strikes and hurricanes in October, the unemployment rate ticked up to 4.2 per cent after holding at 4.1 per cent for two consecutive months.

Early on Dec 11, financial markets saw a roughly 86 per cent probability of a 25 basis points rate cut at the Fed’s Dec 17-18 policy meeting, according to CME Group’s FedWatch Tool.

Fewer rate cuts are, however, expected in 2025 than had been anticipated a few months ago.

Though slower inflation is forecast next year amid a moderation in rents and rising labour market slack, that could be offset by higher prices from tariffs and mass deportations that have been promised by President-elect Donald Trump.

“From a fundamental standpoint, we do not see material upside risk to inflation,” said economist Stephen Juneau at Bank of America Securities. “That said, progress on inflation should stall next year, given our expected changes to tariffs, fiscal and immigration policies.”

Excluding the volatile food and energy components, the CPI increased 0.3 per cent in November, rising by the same margin for the fourth consecutive month.

In the 12 months through November, the so-called core CPI gained 3.3 per cent. That followed a similar advance in October.

The Fed kicked off its monetary policy easing cycle in September. Its benchmark overnight interest rate is now in the 4.50 per cent - 4.75 per cent range, having been hiked by 5.25 percentage points between March 2022 and July 2023 to tame inflation. REUTERS