[ad_1]
Inflation data released on Tuesday showed inflation remained moderate in November, the latest sign that inflation has eased significantly from its June 2022 peak. It is likely that the Federal Reserve will remain on track to leave interest rates unchanged at its final meeting of the year, which will be held this week.
The Consumer Price Index came out a few hours before the Fed began its two-day meeting, which will end with the release of the interest rate decision and a new set of economic forecasts at 2 p.m. on Wednesday. Jerome H. Powell, the chair of the Fed, is scheduled to hold a press conference.
Central bankers have acknowledged a recent slowdown in inflation, and Tuesday’s data showed that inflation remained lower than earlier this year. The total price increased by 0.1 percent monthly, resulting in a 3.1 percent increase compared to the previous year.
It was colder than 3.2 percent in October, and has decreased from a peak of more than 9 percent in the summer of 2022.
But some of the key findings of the report could make Fed officials wary as they consider what to do with the next interest rate hike. Investors expect the central bank to start reducing borrowing costs in the first half of 2024, although officials are trying to open their options.
After removing food and fuel to get a clear sense of the basis of inflation, the so-called inflation rate rose faster each month. And a well-monitored measure to track housing costs was also rapidly climbing; That measure is called “homeowner equity” because it determines how much someone would pay to rent a home they own, and investors thought it would decrease. .
“It reinforces this idea that it will be an empty road to destruction,” said Blerina Uruci, chief U.S. economist at T. Rowe Price. “The Fed can’t cut interest rates quickly in the face of rising service costs.”
The high price increased by 4 percent compared to the previous year, which has remained the same since October. The speed remains above about 2 percent of the speed that was normal before the start of the disease.
Most economists expect inflation to continue to decline in 2024.
That is part of the job of monetary policy. Fed officials raised interest rates between March 2022 and this summer in an effort to slow the economy, hoping to ease demand to offset low interest rates. Because it is more expensive to borrow to make large purchases, the housing market has cooled somewhat and the car market has calmed down.
Lawmakers have also received help from the supply side of the economy. The shipping lanes that were blocked during the epidemic have since been cleared, and factories have received the necessary supplies, reducing the shortage of some key products. The return to normalcy has helped push up commodity prices in recent months.
And as workers return to the labor market, filling open jobs, wages are cooling – which could indicate that inflation will soon stop.
Fed officials have now held off on lending rates for several months as they try to assess whether their policy changes are enough to return rates to a normal pace over time.
“They should be very encouraged,” said Neil Dutta, head of economic research at Renaissance Macro, after the report. “Inflation is falling faster than they expected, and the new numbers don’t change that.”
However, central bankers have been slow to declare victory at a time when inflation is improving but remains high. Investors expect them to maintain that cautious approach this week, although many think the Fed’s next move will be to cut interest rates.
“It will be too soon to conclude with certainty that we have reached a tipping point, or to speculate on when the policy will be relaxed,” said Mr. Powell at the time. a recent speech.
Investors think that borrowing costs could fall in the first half of 2024, based on market expectationsalthough continued economic or price volatility may delay it.
Said Ms. Uruci, sticking to house prices in Tuesday’s report is likely to “push any expected decline later in the year.” Policymakers don’t want to backtrack to a time when inflation is likely to remain at a high rate.
Inflation has repeatedly surprised forecasters since 2021 by easing back into the red, signaling a fast fading challenge.
“It’s hard to be sure after the last few years,” said Laura Rosner-Warburton, senior fellow at MacroPolicy Perspectives.