Physical Address
304 North Cardinal St.
Dorchester Center, MA 02124
WASHINGTON (AP) – Driven by more expensive used cars, hotel rooms and groceries, U.S. inflation edged slightly higher last month in the latest sign that some price pressures remain high.
Consumer prices rose 2.7% in November from a year earlier, up from an annual figure of 2.6% in October. Excluding volatile food and energy costs, so-called core prices rose by 3.3%, the same as the previous month. On a month-on-month basis, prices rose 0.3% from October to November, the biggest increase since April. Core prices also rose 0.3% for a fourth straight month.
Wednesday’s inflation number from the Labor Department is the last key piece of data Federal Reserve officials will consider before they meet next week to decide on interest rates. The relatively mild increase in November is unlikely to be enough to dissuade officials from cutting their key rate by a quarter of a point. The probability of a rate cut next week, as predicted by Wall Street traders, rose to 98% after Wednesday’s inflation report was released, according to futures prices tracked by CME FedWatch.
“It’s generally in the background of what the Fed would like to see,” said Jason Pride, chief investment strategist at Glenmede, an asset management firm.
Although sharp increases for 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 rent, car insurance and airfares, cooled in November.
Last week, Fed Chairman Jerome Powell suggested that with the economy generally healthy, the Fed could reduce its key interest rate slowly.
“We’re not quite there in terms of inflation, but we’re making progress,” Powell said. “We can afford to be a little more careful.”
With the labor market cooling, growth in Americans’ paychecks has slowed from a nearly 6% annual pace in 2022 to about 4% now, a rate nearly in line with inflation at the Fed’s 2% target. Powell has said he does not believe the current labor market is a driver of higher prices.
Randy Carr, CEO of World Emblem, a maker of patches, labels and badges for businesses, universities and law enforcement agencies, said he is giving smaller pay raises, in the 3% to 5% range, than his company did during the height of inflation.
“Things have kind of leveled out,” he said.
Carr’s customers, which include the company that makes badges for UPS uniforms, generally won’t accept price increases of much more than 2% a year. So World Emblem aims to offset the cost of its higher wages through greater efficiency in production.
In September, the Fed lowered its benchmark interest rate, which affects many consumer and business loans, by a sizeable half point. It followed this move with a quarter-point rate cut in November. Those cuts lowered the central bank’s key interest rate to 4.6%, down from a four-decade high 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 drive President-elect Donald Trump’s victory over Vice President Kamala Harris in November.
Grocery prices rose last month, an unpleasant reminder to consumers that food prices remain a big drag on household budgets. Beef prices rose 3.1% straight from October to November and are up 5% year-on-year.
Egg prices, which have been volatile for more than two years in part because of bird flu outbreaks, rose 8.2% last month. They are almost 38% higher than a year ago.
Gas prices rose 0.6% from October to November, ending a series of declines. Even so, gas is down by more than 8% compared to the previous year. Hotel prices rose 3.2% from October to November and are 3.7% higher than a year ago.
Used car prices rose 2% from October to November; new cars increased by 0.6 per cent. These increases may have been driven by an increase in demand following Hurricane Helene’s destruction of existing cars in places like North Carolina.
But a key category that has pushed up prices showed welcome signs of cooling in November: Rents rose just 0.2%, the smallest increase since July 2021. A measure of housing costs also rose just 0.2%, the mildest increase since April 2021.
Fed officials have made clear that they expect inflation to fluctuate along a bumpy path, even as it gradually cools toward their target level. In speeches last week, several of the central bank’s policymakers emphasized their belief that with inflation already down so far, it was no longer necessary to keep their benchmark interest rate quite so high.
Typically, the Fed lowers interest rates to try to stimulate the economy enough to maximize employment, but not so much as to drive inflation high. But the US economy appears to be in solid shape. It grew at a strong annualized pace of 2.8% in the July-September quarter, boosted by healthy consumer spending. That has led some Wall Street analysts to suggest that the Fed may not actually need to cut its key rate any further.
But Powell has said the central bank is looking to “recalibrate” its interest rate to a lower setting, one more in line with tamer inflation.
One potential problem for the Fed’s efforts to keep inflation down is Trump’s threat to impose widespread tariffs on US imports – a move that economists say is likely to send inflation higher. Trump has said he could impose tariffs of 10% on all imports and 60% on goods from China. As a consequence, economists at Goldman Sachs have predicted that core inflation will amount to 2.7% by the end of 2025. Without tariffs, they estimate it 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 high tariffs on imports from Mexico. Carr, the company’s chief executive, said he would try to offset the impact of tariffs through a mix of price increases and reductions in research and development.
“I wish we didn’t have to deal with it, but if we have to, we’ll make plans together,” he said.
