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US Inflation Likely Edged Up in Nov. 12/11 06:02
Annual inflation in the United States may have ticked up last month in a
sign that price increases remain elevated even though they have plummeted from
their painful levels two years ago.
WASHINGTON (AP) -- Annual inflation in the United States may have ticked up
last month in a sign that price increases remain elevated even though they have
plummeted from their painful levels two years ago.
Consumer prices are thought to have increased 2.7% in November from 12
months earlier, according to a survey of economists by the data provider
FactSet, up from an annual figure of 2.6% in October. Excluding volatile food
and energy costs, so-called core prices are expected to have risen 3.3% from a
year earlier, the same as in the previous month.
The latest inflation figures are the final major piece of data that Federal
Reserve officials will consider before they meet next week to decide on
interest rates. A relatively mild increase won't likely be enough to discourage
the officials from cutting their key rate by a quarter-point.
The government will issue the November consumer price index at 8:30 a.m.
Eastern time Wednesday.
The Fed slashed its benchmark rate, which affects many consumer and business
loans, by a half-point in September and by an additional quarter-point in
November. Those cuts lowered the central bank's key rate to 4.6%, down from a
four-decade high of 5.3%.
Though inflation is now way below its peak of 9.1% in June 2022, average
prices are still much higher than they were four years ago -- a major source of
public discontent that helped drive President-elect Donald Trump's victory over
Vice President Kamala Harris in November. Still, most economists expect
inflation to decline further next year toward the Fed's 2% target.
Measured month to month, prices are believed to have risen 0.3% from October
to November. That would be the biggest such increase since April. Core prices
are expected to have increased 0.3%, too, for a fourth straight month. Among
individual items, airline fares, used car prices and auto insurance costs are
all thought to have accelerated in November.
Fed officials have made clear that they expect inflation to fluctuate along
a bumpy path even as it gradually cools toward their target level. In speeches
last week, several of the central bank's policymakers stressed their belief
that with inflation having already fallen so far, it was no longer necessary to
keep their benchmark rate quite as high.
Typically, the Fed cuts rates to try to stimulate the economy enough to
maximize employment yet not so much as to drive inflation high. But the U.S.
economy appears to be in solid shape. It grew at a brisk 2.8% annual pace in
the July-September quarter, bolstered by healthy consumer spending. That has
led some Wall Street analysts to suggest that the Fed doesn't actually need to
cut its key rate further.
But Chair Jerome 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.
One possible threat to the Fed's efforts to keep inflation down is Trump's
threat to impose widespread tariffs on U.S. imports -- a move that economists
say would likely send inflation higher. Trump has said he could impose tariffs
of 10% on all imports and 60% on goods from China. As a consequence, economists
at Goldman Sachs have forecast that core inflation would amount to 2.7% by the
end of 2025. Without tariffs, they estimate it would drop to 2.4%.
When the Fed's meeting ends Wednesday, it will not only announce its
interest rate decision. The policymakers will also issue their latest quarterly
projections for the economy and interest rates. In September, they projected
four rate cuts for 2025. The officials will likely scale back that figure next
week.
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