The Consumer Price Index rose only 0.1 percent between October and November, 3.1 percent higher than a year earlier, suggesting interest rates will hold steady at this week’s Federal Reserve meeting.
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Inflation increased modestly during November, new data shows, reinforcing expectations that the Federal Reserve will abstain from increasing interest rates at its December meeting.
The Consumer Price Index increased 0.1 percent between October and November and was 3.1 percent higher than a year earlier, according to data released Tuesday by the United States Bureau of Labor Statistics, with the index for shelter rising 0.4 percent month over month.
The increase was largely in line with most economists’ expectations, and the annual rate of 3.1 represented a decline from the previous month’s measure of 3.2 percent.
“Despite the uptick in job growth and falling unemployment rate in November, today’s data show that the Fed’s historic monetary tightening is largely reining in inflation, a welcome piece of news for the Fed to consider in its two-day meeting that wraps up tomorrow,” Realtor.com Chief Economist Danielle Hale said in a statement. “Although Chair Powell would not rule out a rate hike in December following the November Fed meeting, today’s data generally reinforce the market’s expectation that the Fed will not need to hike its rate again in December.”
Mortgage rates fell back under 7 percent last week, but homebuyer demand for mortgages remained flat from the week prior.
Shelter costs were responsible for a large portion of the uptick. In addition to increasing 0.4 percent monthly, shelter inflation was 6.5 percent higher in November than it was a year earlier. While that is remarkably high, it is trending lower, down from a 6.7 percent annual increase in October. November’s increase in shelter inflation offset a decrease in the gasoline index, with the energy inflation index falling 2.3 percent month over month.
While the rate of inflation is decreasing slowly, prices remain well above where they were prior to the pandemic.
“Falling inflation does not mean that prices are falling. In fact, prices for just about everything are still higher than they were before the pandemic,” said Lisa Sturtevant, chief economist at Bright MLS. “Housing costs, in particular, are weighing on many individuals and families.”