Falling energy prices are causing inflation in the USA to continue to fall. In November, consumer prices rose by 3.1 percent. However, core inflation excluding energy and food prices remains stubborn.
In the United States, inflationary pressure continues to ease. In November, consumer prices rose by 3.1 percent compared to the same month last year, slightly slower than October’s 3.2 percent, the US Department of Labor said. In September the inflation rate was 3.7 percent.
The year-on-year decline is primarily due to falling energy prices. This cost 5.4 percent less than in November 2022. Food prices, however, rose by 2.9 percent, and housing costs even rose by 6.5 percent.
“The decline in inflation remains a tough process,” commented economist Bastian Hepperle from the private bank Hauck Aufhäuser Lamp. “The core inflation rate, which remains far too high, is particularly stubborn,” said Hepperle. This so-called core rate, excluding the volatile energy and food prices, remained at 4.0 percent.
Interest rate expectations too optimistic?
With the US Federal Reserve paying particular attention to the core rate, financial markets’ rate cut expectations may be premature. “It is precisely for this reason that Fed President Jerome Powell is likely to crush hopes of an early interest rate cut as early as the first quarter of 2024,” said chief economist Thomas Gitzel from VP Bank.
The Fed recently left its key interest rate in the range of 5.25 to 5.50 percent for two meetings in a row. It is expected that it will remain silent again when it comes to the interest rate decision on Wednesday. The markets are expecting four interest rate cuts in the coming year. “An interest rate cut is not realistic until mid-2024,” commented Commerzbank economists Christoph Balz and Bernd Weidensteiner.