...
By Michael D. Carroll
Breaking News Editor
0
Share
Newsweek is a Trust Project member
See more of our trusted coverage when you search.Prefer Newsweek on Googleto see more of our trusted coverage when you search.
Driven by higher costs for used cars, hotel stays, and auto insurance, inflation in the United States edged up slightly last month but remained well below its peak from two years ago.
Consumer prices rose 2.7 percent in November compared to the previous year, up from October's annual increase of 2.6 percent. Excluding the often-volatile food and energy categories, core prices climbed 3.3 percent year-over-year, matching October's figure.
Read More on News
On a monthly basis, consumer prices increased by 0.3 percent from October to November, marking the largest one-month rise since April. Core prices also rose 0.3 percent for the fourth consecutive month.
...
Will the Fed Still Cut Interest Rates?
Wednesday's inflation data from the Labor Department is the final critical report Federal Reserve officials will review ahead of their meeting next week to determine interest rate policy. The modest increase in inflation is unlikely to deter the Fed from proceeding with a widely anticipated quarter-point rate cut, according to most economists and Wall Street traders.
The Federal Reserve reduced its benchmark interest rate, which influences various consumer and business loans, by a significant half-point in September and an additional quarter-point in November. These cuts brought the central bank's key rate down to 4.6 percent, a decrease from its four-decade high of 5.3 percent.
Although inflation has dropped significantly from its peak of 9.1 percent in June 2022, average prices remain roughly 20 percent higher than three years ago. This persistent cost increase has been a key factor in public frustration, contributing to President-elect Donald Trump's victory over Vice President Kamala Harris in November.
Will Inflation Continue to Rise?
Despite these challenges, most economists predict inflation will continue to ease next year, moving closer to the Federal Reserve's two percent target.
Federal Reserve officials have emphasized that they expect inflation to follow an uneven trajectory as it gradually approaches their target level.
In speeches last week, several policymakers expressed confidence that, with inflation having already declined significantly, it is no longer essential to maintain their benchmark interest rate at its current elevated level.
What Does The Fed Say?
Last week, Fed Chair Jerome Powell suggested that with the economy generally healthy, the Fed could reduce its key rate slowly.
"We're not quite there on inflation, but we're making progress," Powell said. "We can afford to be a little more cautious."
The Federal Reserve typically lowers interest rates to stimulate the economy, aiming to maximize employment without reigniting high inflation. However, the U.S. economy remains robust, growing at a strong 2.8 percent annual rate in the July-September quarter, driven by solid consumer spending.
This economic strength has prompted some Wall Street analysts to argue that further rate cuts by the Fed may not be necessary.
But Powell has said that the central bank is seeking to "recalibrate" its rate to a lower setting, one more in line with tamer inflation. In addition, hiring has slowed a bit in recent months, raising the risk that the economy could weaken in the coming months. Additional rate cuts by the Fed could offset that risk.
This article includes reporting from The Associated Press
View 0 Comments
Submit Correction
View Editorial & AI Guidelines