The Bureau of Labor Statistics reported that the consumer price index (CPI) showed a 12-month inflation rate of 2.7% in November, as expected.
This represented an increase of 0.3% on the month and was 0.1 percentage point higher than in October.
The big picture: The report further solidified the market outlook for a rate cut by the Federal Reserve at its upcoming policy meeting, with traders raising the odds to 99%, according to the CME Group’s FedWatch measure.
- Additionally, odds of a January reduction also edged higher, hitting about 23%.
- Although inflation has decreased significantly from its mid-2022 peak, it remains above the Fed’s 2% annual target.
Driving the news: The November increase in the CPI was largely driven by rising shelter costs, which increased by 0.3%.
- The shelter index rose by 4.7% on a 12-month basis in November, and it accounted for about 40% of the total increase in November.
- Used vehicle prices rose by 2% monthly, while new vehicle prices increased by 0.6%, reversing the recent trend that has seen those items come down.
- Food costs rose by 0.4% monthly and 2.4% year over year, and the energy index also increased by 0.2% but was down by 3.2% annually.
- The increase in the CPI meant that average hourly earnings for workers were basically flat for the month when adjusted for inflation but increased by 1.3% from a year ago.
