US inflation shows slight increase in November

Inflation slightly goes up for a second consecutive month in U.S., reaching 2.7% annually, the Bureau of Labor Statistics reports on Wednesday.

This was in line with the median forecast of economists surveyed by Dow Jones Newswires and The Wall Street Journal. “November’s CPI report delivered more evidence that progress in lowering inflation has stalled,” economists at Wells Fargo wrote in an investor note published Wednesday.

The November inflation data is “just about good enough,” analysts at Evercore ISI wrote in a note to clients, adding it left the Fed on track to cut rates again at its next interest rate decision on Dec. 17 and 18.

Inflation restrains interest rate cuts

On a monthly basis, headline inflation rose 0.3%, propped up by stubborn housing costs. Several other indexes also edged higher, including food, energy, medical care and recreation, the Labor Department said.

Among the sharpest year-on-year increases was the cost of eggs, which has surged by 37.5% as the U.S. has contended with avian flu. The back-to-back increases add to the challenges the Fed faces in returning inflation to its long-term target of 2%, potentially slowing the pace of rate cuts over the coming months.

The Fed’s favored inflation gauge, the PCE price index, which differs slightly from CPI, also rose in October, underscoring the bumpy path back to 2%. The U.S. central bank recently began dialing back interest rates from a two-decade high, and its benchmark lending rate currently sits at between 4.50% and 4.75%, down three quarters of a percentage-point from September.

Republicans seek a ‘fiscal turnaround’

The financial markets overwhelmingly expect the Fed to make another quarter point cut next week, according to CME Group data. This will be the last Fed rate decision before President Joe Biden hands over the White House to incoming Republican Donald Trump.

In a statement, Biden’s top economic adviser attempted to paint the inflation data in a more positive light. “For four months in a row now, inflation has been close to the level right before the pandemic,” National Economic Council Director Lael Brainard said, adding the administration would “continue to fight to lower costs for American families.”

Anyway, Republicans in Congress took a very different view, with Florida Senator Rick Scott criticizing the rise in the cost of living under Biden. “The Biden-Harris administration will be remembered forever by families for its 20% inflation and economic failures that placed historic financial burdens on folks in every state,” he said in a statement. “It’s time for a total fiscal turnaround on the national level,” he added.

Challenges for Trump

The U.S. labor market has proven to be relatively resilient to high interest rates, despite some recent signs of weakness, with hiring still strong and the unemployment rate remaining low.

At the same time, economic growth has been robust, giving the Fed an excuse to pause rate cuts in the coming months to see how its fight against inflation unfolds, should it wish to.

The U.S. consumer inflation rate slowed for much of this year, falling to 2.4% year-on-year in September, before reversing course in recent months. That could pose a challenge for the incoming Trump administration, which made tackling inflation and the cost of living a top priority on the campaign trail.

A measure of inflation that strips out volatile food and energy costs known as core inflation came in at 3.3% in the 12 months to November, and rose by 0.3% from October, according to the Bureau of Labor Statistics.