Inflation heated up last month as consumer prices rose 2.7%, underscoring the outlook for the future.

CNN
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Inflation heated up again in November, but it probably wasn’t bad enough for the Federal Reserve to cut rates next week.

Consumer prices rose by 2.7% in the 12 months ending in November, and were on the rise An annual increase of 2.6% was seen in October and marked the highest annual rate since July, according to the latest Consumer Price Index data released Wednesday by the Bureau of Labor Statistics.

On a monthly basis, prices rose 0.3% after rising 0.2% in the previous four months.

Economists had expected inflation to rise 0.2% from October to a 2.7% annual increase, mainly due to unfavorable comparisons to a year ago and stubborn housing-related inflation.

However, in November, shelter-related costs weren’t the main driver of the monthly increase: shelter prices rose 0.3% for the month, accounting for nearly 40% of the overall gain (while in recent months, that share has been north of the mark). 50%, and sometimes 70% and 90%).

Instead, food (up 0.4%) and energy prices were the main drivers, rising 0.2% and showing the first increase in the category in six months. The prices of new and used cars also increased by 0.6% and 2%, respectively.

Food and gas are two of the most visible and frequent ways consumers fight inflation. And when prices go up in areas where people — especially low-income Americans — spend the majority of their monthly budgets, it’s a frustrating effort.

“Many consumers pay attention to inflation headlines, but base their opinions on the health of the economy on their own personal experiences,” Elizabeth Renter, senior economist at personal finance site NerdWallet, wrote Wednesday. “The prices that affect your bottom line may not be the biggest influence on this month’s inflation data. And when your budget is tight, even though inflation has slowed significantly in recent years, it can be hard to stay optimistic.”

Food and energy-related issues are also subject to high volatility, such as weather and disease. So to better understand underlying inflation trends, economists and policymakers look closely at “core” readings, which exclude food and energy costs.

Core CPI rose 0.3% for the fourth consecutive month and remained at 3.3%, where it has been since September.

“The KPI print confirms market consensus for another (quarter-point) rate cut from the Federal Reserve,” Josh Hirt, senior U.S. economist at Vanguard, wrote on Wednesday. “We are still closely monitoring the strength of the labor market and the stickiness of some components of inflation (shelter, services) looking ahead to 2025.”

The CPI measures changes in the prices of a basket of commonly purchased goods and services.

And in November, the cost of that grocery cart was a little more painful than it had been in a while.

Prices of food purchased for home consumption rose 0.5% from October, marking the largest monthly increase since January 2023.

Four of the six major grocer food group indexes increased, with beef up 3.1% and eggs up 8.2%. A constant deadly bird flu along with holiday demand it has caused a shortage and the price of eggs has risen.

Egg prices are up 37.5% since this time last year, BLS data show.

Despite the sticker shock on staples, food price inflation (at 1.6% annually) is still below the overall CPI rate. But the cumulative effect of nearly four years of above-normal inflation has weighed heavily on consumers, said Tyler Schipper St. Paul (Minnesota) St. Thomas University associate professor of economics and data analysis in an interview with CNN. Wednesday

Food price inflation “was already a big pain before this, so any change in food prices will be a big story for households,” he said, adding that egg prices are an important part of that story.

“We have some PTSD around pandemic egg prices and certainly around bird flu outbreaks, but for those prices to go up almost 40% year-over-year is certainly another thing that people will be looking at in the grocery store and a symbolic measure of higher food prices in general he’ll use it as, even if he’s out,” he added.

Speaking of externalities, the indexes for cereal and bakery products fell 1.1% from October, the largest monthly decline in that index since 1989, the BLS said in the report.

What this means for the Fed and rate cuts

November’s CPI data showed price pressures persisted, but also eased largely in line with expectations that the Fed would cut rates by another quarter point when it meets next week.

In addition to financial market participants predicting a rate cut, central bank officials have made similar indications. last week, Fed Governor Christopher Waller said he is leaning to the side a reduction, as long as there are no “upward surprises” that change the outlook for the path of inflation.

However, the latest inflation data may not make it an easy decision for the Fed, Schipper said.

“We have two CPI prints that were up year on year; (producer price index), therefore Top inflation rose last month; (a The personal consumption expenditure price index) rose last month; All the basic measures of these things were received,” he said. “These can be written off as bumps in the road, but it paints a picture of stagnant inflation, where they’re not making the kind of progress we’ve seen before.”

However, the November report showed continued (albeit slow) progress in a major driver of inflation, he added.

Shelter indexMeasuring “the service provided by a housing unit to its occupants,” the CPI is one of the largest components of the basket of goods and services, accounting for a third of the overall index.

And that category has been significantly higher than inflation for more than two years, BLS data show. After peaking at 8.2% in March, it has eased and is now at an annual rate of 4.7%, the lowest since February 2022.

Excluding shelter inflation, all other prices rose 1.6% from the same period last year, NerdWallet’s Renter said.

“Some (Federal Reserve) members are likely to relax on improving services and housing inflation,” Scott Anderson, chief U.S. economist at BMO Capital Markets Economics, wrote in a note on Wednesday. “That said, the Fed will need to see further improvement in inflation in the coming months if it is to stick to its ongoing plan for additional rate cuts next year.”

Looking ahead to 2025, there are a number of obstacles to a further slowdown in inflation, notably the impact of prices. any new rates It was implemented by President-elect Donald Trump.

“Higher import rates early next year could further exacerbate the Fed’s persistent inflation problem,” Anderson wrote.