A measure of inflation closely watched by the Federal Reserve slowed last month, one other sign that the long rise in consumer prices appears to be easing.
Friday’s Commerce Department report showed prices rose 5.5% in November compared to a 12 months earlier, down from a revised 6.1% increase in October and the smallest increase since October 2021. Excluding volatile food and energy prices, so-called core inflation increased by 4.7% compared to the previous 12 months. It was also the smallest increase since October 2021.
On a monthly basis, prices rose by 0.1% from October to November after rising by 0.4% within the previous month. Core prices increased by 0.2%.
Inflation, which began soaring a 12 months and a half ago because the economy rebounded from the 2020 coronavirus recession, continues to be well above the two percent year-on-year growth the Fed wants to see.
The central bank has raised its benchmark rate of interest seven times since March in an attempt to bring consumer prices under control.
Higher prices and credit costs could hit American consumers. Their spending increased by just 0.1% from October to November and didn’t increase in any respect after accounting for higher prices.
“We expect a slowdown in household spending because the Fed raises rates of interest in 2023,” Rubeela Farooqi, chief US economist at High Frequency Economics, wrote in a research note.
Nonetheless, Americans’ after-tax income rose 0.3% in November, even after adjusting for inflation.
The Fed is believed to be monitoring the Commerce Department’s inflation rate, which was released Friday, called the Personal Consumption Expenditure Price Index, much more closely than the Labor Department’s more well-known Consumer Price Index. The CPI rose 7.1% in November from 12 months earlier, compared with June’s 9.1% year-on-year increase, which was the biggest such jump in 4 many years.
The PCE index tends to show a lower rate of inflation than the CPI. Partially because rents which have skyrocketed have twice as much impact on the CPI as on the PCE.
The PCE Price Index can also be designed to account for changes in the way you shop when inflation spikes. Because of this, it might probably capture, for instance, when consumers switch from expensive domestic brands to cheaper store brands.