With US Inflation Holding Steady, The Fed Might Be Able To Stay The Course

With US Inflation Holding Steady, The Fed Might Be Able To Stay The Course
Paul Allison, CFA

3 months ago2 mins

What’s going on here

US prices cooled ever so slightly from the month before, hinting that the Federal Reserve (the Fed) may be able to stay the course, at least for now.

What does this mean?

US prices rose a year-over-year 3.1% in November, just a tad milder than October’s 3.2%. But shoppers probably felt pretty jolly about that as they hit the Black Friday sales. After all, October's figure is far lower than the 9.1% inflation the economy recorded in June of last year, even if it is still hotter than the Fed would like it.

US inflation

Why should I care?

For markets: Sea legs.

What’s a pirate’s favorite letter? You’d think it be arrr, but it be the ‘C’. Anyway, captain of the Fed, Jerome Powell, is probably not in the mood for jokes. That’s because he’s knotted the central bank's future interest rate moves to economic data, which do have a tendency to blow in different directions from one month to the next. So far the Fed’s been steady at the helm, and has steered the economic ship through some high seas. But docking this vessel will take considerable skill.

The bigger picture: Oil aboard.

Scan the items that make up the consumer price index, and two big numbers will jump out at you: gasoline was down 6% last month and fuel oils were down 3%. By and large, economists focus on the core inflation metric, which excludes more volatile components like food and energy. But think back to the start of this whole inflation drama: it began with a spike in energy prices that eventually led to the cost of all other goods going up. After all, commodities are in just about everything, from clothing to paints. So, it’s probably reasonable to assume that as those commodity prices ebb, they should pull down the prices of everything else.

Inflation categories


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