New data from the US Bureau of Labor Statistics (BLS) on Wednesday showed that consumers paid 2.7% more for essentials such as housing, food and energy in November compared to the same time last year.
The bureau reported that the consumer price index (CPI), a key measure of inflation and price changes, rose 0.3% from October to November. This is more than the 0.2% that the CPI rose from September to October.
The main driver of the increase was the 0.3% monthly increase in housing costs, which the BLS said accounted for nearly 40% of the monthly increase for all items.
Related: 'Gradual recalibration:' Fed cuts rates by 0.25%, just as economists predicted
Over the past year, the food category increased by 2.4% while energy decreased by 3.2%. The core CPI reading, or prices for all items excluding food and energy, rose 3.3% over the past year.
“On the surface, you have commodity prices still declining year-over-year and prices of basic services rising at their slowest pace since early 2022,” said Elyse Ausenbaugh, head of investment strategy at JP Morgan Wealth Management. The entrepreneur in an emailed statement. “It's also encouraging to see low house price pressures, given that they still make up a significant portion of core reading.”
What does the CPI report mean about the Fed's interest rate cut?
The CPI report is a data point that the Federal Open Market Committee (FOMC) uses to determine how to adjust the federal funds rate, or the rate at which banks borrow from each other. An FOMC meeting will be held from December 17 to 18.
“We believe the economic fundamentals of mildly slowing labor market momentum, strong productivity growth and disinflationary undercurrents will support a further cut in the fed funds rate by 25 basis points at the next Fed meeting. FOMC,” said EY Chief Economist Gregory Daco and EY Senior Economist Lydia Boussour. The entrepreneur in a joint email statement.
A rate cut of 25 bps or 0.25% could flow into lower borrowing rates for consumer loans, such as mortgages and credit cards.
Ausenbaugh also agrees that the Fed will cut rates at “a steady pace, 25 bps per meeting.”
“We think the Fed will cut at next week's December meeting, with market expectations giving them 'permission' to do so,” she said.