Fueled by pricier used cars, hotel rooms and auto insurance, inflation in the United States moved slightly higher last month while remaining far below its peak of two years ago.
Consumer prices rose 2.7 percent last month from a year earlier, up from a yearly figure of 2.6 percent in October. Excluding volatile food and energy costs, so-called core prices increased 3.3 percent, the same as in the previous month.
From October to last month, consumer prices climbed 0.3 percent, the biggest monthly increase since April. Core prices also rose 0.3 percent for a fourth straight month.
Photo: Will Oliver, EPA-EFE
Yesterday’s inflation figures from the US Labor Department are the final major piece of data that US Federal Reserve officials will consider before they meet next week to decide on interest rates.
The relatively mild increase won’t likely be enough to discourage the officials from cutting their key rate by a quarter-point, as most economists and Wall Street traders expect.
The Fed slashed its benchmark rate by a sizable half-point in September and by a quarter-point last month. Those cuts lowered the central bank’s key rate to 4.6 percent, down from a four-decade high of 5.3 percent.
Though inflation is now way below its peak of 9.1 percent in June 2022, average prices are still about 20 percent higher than they were three years ago — a major source of public discontent that helped drive president-elect Donald Trump’s victory over Vice President Kamala Harris last month. Still, most economists expect inflation to decline further next year toward the Fed’s 2 percent target.
Fed officials have made clear that they expect inflation to fluctuate along a bumpy path even as it gradually cools toward their target level. In speeches last week, several of the central bank’s policymakers stressed their belief that with inflation having already fallen so far, it was no longer necessary to keep their benchmark rate quite as high.
Fed Chair Jerome Powell has said that the central bank is seeking to “recalibrate” its rate to a lower setting, one more in line with tamer inflation. In addition, hiring has slowed a bit in recent months, raising the risk that the economy could weaken in the coming months. Additional rate cuts by the Fed could offset that risk.
One possible threat to the Fed’s efforts to keep inflation down is Trump’s threat to impose widespread tariffs on US imports — a move that economists say would likely send inflation higher.
Trump has said he could impose tariffs of 10 percent on all imports and 60 percent on goods from China. As a consequence, economists at Goldman Sachs Group Inc have forecast that core inflation would amount to 2.7 percent by the end of next year. Without tariffs, they estimate it would drop to 2.4 percent.
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