Inflation in the United States slowed again last month in the latest sign that price increases are gradually cooling despite the pressures they continue to inflict on American households.
Consumer prices rose 7.1 per cent in November from a year ago, the government said Tuesday. That was down from 7.7 per cent in October and a recent peak of 9.1 per cent in June. It was the fifth straight slowdown.
On a month-to-month basis, the consumer price index rose just 0.1 per cent in November, down from 0.4 per cent in October.
Even with last month’s further easing of inflation, the Federal Reserve plans to keep raising interest rates. On Wednesday, the Fed is set to boost its benchmark rate for a seventh time this year, a move that will further raise borrowing costs for consumers and businesses. Economists have warned that in continuing to tighten credit to fight inflation, the Fed is likely to cause a recession next year.
Tuesday’s government report showed that inflation in November was slowed by less expensive gasoline, electricity and used cars, among other items.
Several trends have started to reduce price pressures, though they won’t likely be enough to bring overall inflation back down to levels that Americans were used to anytime soon.
The national average for a gallon of regular gas has sunk from US$5 a gallon in June to US$3.26 as of Monday. Many supply chains have also unsnarled, helping reduce the costs of imported goods and parts. Prices for lumber, copper, wheat and other commodities have fallen steadily, which tends to lead to lower construction and food costs.
Markets encouraged by easing inflation
Wall Street futures jumped Tuesday after the government released its consumer prices report showing that inflation slowed more in November than analysts had expected.
Futures for the Dow climbed 2.2 per cent — or more than 700 points — and futures for the S&P 500 rose 2.7 per cent before the bell.
The government said Tuesday that consumer prices rose 7.1 per cent in November from a year ago, down from 7.7 per cent in October and a recent peak of 9.1 per cent in June. It was the fifth straight slowdown and investors cheered the news, immediately sending markets sharply higher before the open just as the Federal Reserve get ready to hold their last policy meeting of 2022.
Economists had forecast that inflation slowed to 7.3 per cent last month from 7.7 per cent in October.
On a month-to-month basis, the consumer price index rose just 0.1 per cent in November, down from 0.4 per cent in October.
Markets have struggled this year thanks to high inflation and the interest rate hikes engineered to combat it. Higher rates slow business activity by design but also risk causing a recession if they go too high, all while dragging down prices of investments.
Policymakers at the Federal Reserve begin a meeting Tuesday. When it wraps up Wednesday, investors expect the central bank to announce its last rate hike of the year. Most analysts and economists expect a half-point hike by the Fed, less than the three-quarters of a point the Fed has issued at its last four meetings.
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