WASHINGTON – US consumer prices picked up in November, reinforcing the Federal Reserve’s intent to keep interest rates elevated in the near term.
The so-called core consumer price index, which excludes food and energy costs, increased 0.3 per cent following a 0.2 per cent advance in October, according to government figures. From a year ago, it advanced 4 per cent for a second month.
Economists favour the core metric as a better gauge of the trend in inflation than the overall consumer price index. That measure ticked up slightly after being little changed in October. From a year ago, it was up 3.1 per cent.
Tuesday’s data underscore the choppy nature of getting inflation back in line. While price pressures have largely retreated from multi-decade highs, a still-strong labour market continues to power consumer spending and the broader economy.
With inflation figures out of the way, investors are now awaiting the outcome of Wednesday’s Federal Reserve meeting. The central bank is widely expected to keep rates on hold, with the spotlight squarely on comments from Chair Jerome Powell during his news conference and the central bank’s economic projections.
The Bureau of Labour Statistics figures reflected increases in rents, medical care and motor-vehicle insurance. Used-car prices rose for the first time since May. On the other hand, apparel and furniture costs declined.
Shelter prices, which make up about a third of the overall CPI index, rose 0.4 per cent, offsetting a decline in gasoline prices. Economists see a sustained moderation in the shelter category as key to bringing core inflation down to the Fed’s target.
Equities have rattled higher, while bond yields have fallen in recent weeks on the back of growing investor conviction that interest rates are about to fall quite swiftly, as the US economy in particular coasts towards a soft landing.
The MSCI All-World index, which is trading around four-month highs, was up 0.2 per cent. In Europe, the STOXX 600 edged down after the data, but was still close to 22-month highs, while US index futures rose 0.1 per cent -0.2 per cent.
US Treasury yields fell after data showed inflation in the world’s largest economy came in line with expectations, suggesting the Federal Reserve is likely at the end or near the end of its tightening cycle.
The benchmark US 10-year yield fell 1.7 basis points (bps) to 4.221 per cent. It dropped as much 7 bps immediately after the data.