The Fed's preferred inflation gauge eased in November


TO closely watched inflation measure cooled noticeably in November, good news for the Federal Reserve as officials move into the next phase in their fight against rapid price increases and positive news for the White House as voters face less cost increases. discouraging.

The personal consumption expenditures inflation measure, which the Federal Reserve cites when it says it targets average inflation of 2 percent over time, rose 2.6 percent in the year through November. This was down from 2.9 percent the previous month and was less than economists had forecast. Compared to the previous month, prices decreased slightly.

After removing volatile food and fuel prices to get a clearer view of underlying price pressures, inflation rose 3.2 percent over the year. That was down from 3.4 percent previously.

The report provided the latest evidence that price increases are slowing rapidly, after several months of progress that have helped convince authorities that a soft economic landing may be in sight, one in which the Inflation moderates without a painful recession. Fed Policymakers kept interest rates stable At their meeting this month, they signaled that they may well be done raising interest rates and suggested they might even cut borrowing costs three times next year.

“Inflation has come down from its peaks, and this has occurred without a significant increase in unemployment; that is very good news,” Jerome H. Powell, chairman of the Federal Reserve, said at that meeting. Still, he emphasized that “the path forward is uncertain.”

The report released Friday also showed that consumers are still spending at a moderate pace. A measure of personal consumption rose 0.2 percent from October and 0.3 percent after adjusting for inflation. Both readings were faster than the previous month.

The Federal Reserve is expected to begin lowering interest rates as soon as March, depending on market prices, although officials have discussed that it is too early to talk about when the rate cuts will begin.

Central bankers are likely to watch closely for signs that inflation has continued to cool as they contemplate when they can lower borrowing costs. Some officials have suggested that keeping interest rates steady when price increases are slowing would effectively squeeze more out of the economy (interest rates don't adjust to prices, so they rise after removing inflation as inflation falls). ).

Policymakers are also likely to keep a close eye on consumer spending as they try to determine how much momentum the economy has left. Officials still expect the economy to slow more noticeably in 2024, a cooling in demand that they believe would pave the way for slower, more sustainable price increases.

After a year in which inflation cooled rapidly despite surprisingly strong growth, economists are expressing humility. But authorities remain cautious about a situation in which growth remains too strong.

“If there is solid growth, what that will mean is that we will probably keep the labor market very strong; “will likely put some upward pressure on inflation,” Powell said in his Press conference. “That could mean it takes longer to get to 2 percent inflation.”

That, he said, “could mean we need to keep rates higher for longer.”

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