Inflation Rises As Expected In November, Sustains Hopes For December Interest Rate Cut

Inflationary pressures intensified as expected in November, but the trend is beginning to show signs of stickiness, posing fresh challenges to the Federal Reserve’s 2% target after months of disinflation.

The Consumer Price Index rose by 2.7% year-over-year in November 2024, exceeding October’s 2.6% reading and matching analyst estimates of 2.7%, according to TradingEconomics. This marks the second consecutive increase in annual inflation — a trend not seen since April.

On a monthly basis, the CPI jumped 0.3%, accelerating from October's 0.2% gain and matching expectations of a 0.3% rise, official data released Wednesday shows.

The index for shelter rose 0.3% in November, representing 40% of the monthly overall inflation increase.

Items that surged in November include shelter, used cars and trucks, household furnishings and operations, medical care, new vehicles and recreation. “The index for communication was among the few major indexes that decreased over the month,” the Bureau of Labor Statistics said in a press release.

Core inflation, which excludes volatile items like food and energy, remained stubbornly high at 3.3% year-over-year, in line with forecasts and consistent with the previous two months. This persistent level underscores the challenges in taming underlying price pressures. On a monthly basis, core inflation rose 0.3%, unchanged from October and matching expectations.

Indexes that increased in November include shelter, used cars and trucks, household furnishings and operations, medical care, new vehicles and recreation. The index for communication was among the few major indexes that decreased over the month.

Services inflation grew by 4.6% on a year-over-year basis, marking a slowdown from October's 4.8% figure.

November Inflation Report: Key Highlights

Metric	November 2024	October 2024	Estimate
CPI (year-over-year)	2.7%	2.6%	2.7%
CPI (month-over-month)	0.3%	0.2%	0.3%
Core CPI (YoY)	3.3%	3.3%	3.3%
Core CPI (MoM)	0.3%	0.3%	0.3%

Interest Rate Cut Expectations Under Scrutiny

The November CPI report comes just one week before the Federal Reserve’s final policy meeting of 2024.

Markets have widely priced in a 86% probability of a 25-basis-point rate cut, anticipating further easing.

The U.S. dollar index, as tracked by Invesco DB USD Index Bullish Fund ETF UUP, showed no major reactions after the report, holding gains of 0.2% for the session.

Treasury yields slightly fell, with the rate-sensitive two-year note yield down by 2 basis points to 4.14%.

Equity futures rose during premarket trading. S&P 500 futures were 0.4% higher.

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