Inflation holds steady ahead of Fed meeting
Inflation data released on Tuesday showed that price increases remained moderate in November, the latest sign that inflation has cooled substantially from its June 2022 peak. That’s likely to keep the Federal Reserve on track to leave interest rates unchanged at its final meeting of the year, which takes place this week.
The Consumer Price Index came out just hours before the Federal Reserve Board of Governors began its two-day gathering, which will conclude with the release of an interest rate decision and a fresh set of quarterly economic projections at 2 p.m. Wednesday.
Central bankers have embraced a recent slowdown in price increases, and Tuesday’s data largely suggested that inflation remains lower than earlier this year. Overall inflation climbed 0.1 percent on a monthly basis, making for a 3.1 percent increase compared to a year earlier.
That was cooler than 3.2 percent in October, and it is down notably from a peak above 9 percent in the summer of 2022.
But some of the report’s underlying details could keep Fed officials wary as they contemplate what to do next with interest rates. Investors expect central bankers to begin lowering borrowing costs within the first half of 2024, though officials have been trying to keep their options open.
After stripping out volatile food and fuel to give a clearer sense of underlying inflation trends, so-called core inflation climbed more quickly on a monthly basis. And a closely watched measure that tracks housing expenses also climbed more quickly; that measure is called “owners’ equivalent rent” because it estimates how much it would cost someone to rent a home that they own, and economists have been expecting it to decline.
“It reinforces this idea that it’s going to be a bumpy road to disinflation,” said Blerina Uruci, chief US economist at T. Rowe Price. “The Fed cannot cut interest rates too soon in the face of resilient services inflation.”
Core inflation was up by 4 percent compared to a year earlier, holding steady from October. That pace remains well above the roughly 2 percent pace that was normal before the onset of the pandemic.
Fed officials have now held borrowing costs steady for several months as they try to assess whether they have adjusted policy enough to return price increases to a normal pace over time.