U.S. consumer price inflation fell more than expected in November to a one-year low, bolstering plans by the Federal Reserve to slow the pace of interest rate hikes and sending U.S. stock futures and government bonds higher.
The consumer price index (CPI) fell last month at an annual rate of 7.1 percent, lower than economists’ forecast of 7.3 percent and the recorded rate of 7.7 percent. in October. This is the lowest level since December 2021.
Compared to the previous month, overall CPI rose 0.1 percent, down from October’s 0.4 percent increase.
The “core” measure, which strips out volatile energy and food costs, also fell 6 percent year-over-year. That marked a slowdown from October’s 6.3 percent increase, despite a 0.2 percent month-on-month increase.
The data sent stock futures and bond prices higher. Futures pointed to a 3 percent gain for the S&P 500 at the opening bell, compared with a 0.8 percent gain forecast before the release of consumer prices figures. The two-year US Treasury yield decreased by 0.16 percentage points to 4.23 percent.
The data, released by the Bureau of Labor Statistics on Tuesday, came at the start of a final meeting of the Federal Open House Committee. two-day policy meeting of the year.
The US central bank is set to raise its benchmark policy rate by half a percentage point on Wednesday, breaking a months-long streak of 0.75 basis point hikes and marking the start of the next round of policy tightening.
The hike would push the federal funds rate into a new target range of 4.25 percent to 4.5 percent, which most officials say is not high enough to bring inflation back to the Fed’s long-term 2 percent target.
On Wednesday, FOMC members and other regional bank presidents are expected to signal support for a policy rate of between 4.75 percent and 5.25 percent next year and to keep it at that level until at least 2024. It will be given a slight advantage. – The so-called “Terminal” interest rate decision between 5 percent and 5.25 percent suggests that interest rates will continue to rise until at least March.
That compares with a peak rate of 4.6 percent that officials expected in September, when individual forecasts were last published. Accounting for the change in expectations is an acknowledgment that inflationary pressures will be more difficult than expected.
Energy and commodity prices have started to slow this year, helping to push annual CPI growth to 9.1 percent earlier in June. But service-related spending has grown at an alarming rate, fueled in part by accelerating wage growth as a result of surprising resilience. labor market.
Fed officials acknowledged that bringing inflation under control would require a sustained period of low growth and higher unemployment, but they failed to predict an outright recession. Most economists say economic contraction will be necessary and expect it to be mild next year.
