The Economy

U.S. Consumer Prices Hit Highest Level in a Year

The CPI rose 2.1% in November on a year-on-year basis but the Fed "doesn’t expect inflation to sharply exceed its 2% goal anytime soon."
Matthew HellerDecember 11, 2019
U.S. Consumer Prices Hit Highest Level in a Year

U.S. consumer prices rose in November to the highest level in a year but not enough to suggest a surge in inflation.

The Labor Department reported on Wednesday that its consumer price index increased 0.3% last month as households paid more for gasoline, health care, and rent. In the 12 months through November, the CPI rose 2.1% from 1.8% in October — the highest level since November 2018.

Economists polled by Reuters had forecast the CPI climbing 0.2% in November and rising 2.0% on a year-on-year basis.

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Excluding the volatile food and energy components, the CPI rose by 0.2%, matching October’s increase. The yearly increase in the so-called core rate was unchanged at 2.3%.

As MarketWatch reports, “The pace of consumer inflation slowed earlier this year after touching a six-year peak of 2.9% in mid-2018, giving the Federal Reserve the leeway to cut interest rates to shore up the economy amid a tense trade dispute with China.”

“Consumer prices could continue to creep higher if the economy speeds up, but the Fed doesn’t expect inflation to sharply exceed its 2% goal anytime soon,” MarketWatch added.

The PCE index, the Fed’s preferred inflation measure, rose just 1.3% in the 12 months ended in October. At its meeting Wednesday, the Fed’s policy-making committee voted to keep interest rates unchanged and indicated that it may maintain borrowing costs where they are in 2020.

The Fed has signaled it “will be comfortable letting inflation run ahead of their target, which means it will be even longer before inflation again becomes a material concern,” said Richard Moody, chief economist of Regions Financial.

November’s firmer inflation readings followed a report last Friday showing the economy added a robust 266,000 jobs in November and the unemployment rate fell back to 3.5%, its lowest level in nearly half a century. “Other data on housing, trade, and manufacturing have also been relatively upbeat, and suggested the economy was growing at moderate speed rather than stalling,” Reuters said.

Photo source: BRYAN R. SMITH/AFP via Getty Images