Preferred inflation measure rises, impacting expectations for rate cuts

Inflation Measure Increases in November

In November, the inflation measure recommended by the Federal Reserve saw an increase, indicating that while consumer spending remains robust, prices are still elevated.

The Department of Commerce reported that consumer prices rose by 2.8% compared to November of the previous year, up slightly from October’s annual rate of 2.7%.

When looking at core prices—excluding the often unstable food and energy sectors—they also rose by 2.8% on a yearly basis in November, marking a small uptick from the 2.7% increase recorded in October.

Additionally, personal consumption spending rose by 0.5% month-over-month in November, reflecting solid economic growth during the last part of the year.

These figures suggest that the economy is generally performing well, even though inflation continues to rise. That being said, it has significantly decreased from its peak—a 40-year high recorded in June 2022.

On another note, job growth has slowed considerably, and many job seekers are feeling increasingly dissatisfied, despite low unemployment rates.

The data released on Thursday implies that the Federal Reserve is not likely to lower interest rates at its upcoming meeting, a typical move when there’s concern about economic weakness.

Edward Jones economist James McCann mentioned that the current data should give some reassurance to the Fed about the economy’s strength, even as the labor market cools. He noted there seems to be little urgency to cut rates, and should growth remain steady into 2026 while inflation stays above target, the Fed might keep rates steady even longer.

On a monthly basis, both overall and core inflation rates rose by just 0.2% from October, indicating that price increases were moderate.

If this trend continues, inflation could gradually approach the Federal Reserve’s target of 2%.

The data released on Thursday comes with a six-week delay, reflecting patterns seen before significant events, like last fall’s government shutdown.

Alongside strong consumer spending numbers, another report also showed a healthy annual growth rate of 4.4% for the economy during the July-September quarter, marking the highest growth seen in two years.