Inflation ticks higher as Fed eyes another rate cut

(The Hill) -- Inflation picked up slightly in November, according to data released Wednesday by the Labor Department, but likely not by enough to derail the Federal Reserve's plans for another rate cut.

Consumer prices rose 0.3 percent in November and 2.7 percent over the past 12 months, according to new Consumer Price Index (CPI) data released Wednesday. The monthly inflation rate and annual inflation rate each rose by 0.1 percentage points from their October levels, in line with consensus estimates from economists.

Rising shelter and food prices drove much of the November bump, with a 0.3 percent in housing prices driving 40 percent of the inflation increase, according to the Labor Department.

The slight increase in inflation is unlikely to stop the Fed from cutting rates at its final monetary policy meeting of the year. The Federal Open Market Committee (FOMC), the panel of Fed officials responsible for setting interest rates, will meet Dec. 17-18 and is expected to end the meeting with a 0.25 percentage point interest rate cut.

While the Fed is still expected to cut, a booming November jobs report and turnarounds in consumer confidence may give the bank reason to delay future reductions in interest rates.

But the central bank is expected to keep its options open as markets brace for the impact of President-elect Trump's economic agenda, which features steep tariffs and plans to deport millions of immigrants to the U.S.

“I would still anticipate a rate cut at the next meeting, but there’s going to be signaling that the next few rate cuts are going to be longer spaced,” Gregory Daco, chief economist at audit firm EY, said Wednesday in an interview on Yahoo Finance.

The Fed cut interest rates in September for the first time since 2020 and after the central bank hiked borrowing costs to a two-decade high to fight the post-pandemic inflation surge.

While annual inflation has plummeted from a peak of 9.1 percent in June 2022, price growth still remains above the Fed's 2 percent annual target.

Food and shelter costs were also one of the key drivers of the post-pandemic inflation boom, squeezing households with higher costs for basic needs.

Grocery prices rose 0.5 percent in October and are up 1.6 percent on the year, while prices for restaurant, takeout and prepared foods are up 3.6 percent over the past 12 months.

"For four months in a row now, inflation has been close to the level right before the pandemic. While price increases have been hard for working families, household incomes are up almost $4,000 more than prices during this Administration. We will continue to fight to lower costs for American families," White House National Economic Council Director Lael Brainard said in a statement.