Inflation unexpectedly dropped three-tenths of a percentage point to 2.7% for the year ending in November, according to an update to the consumer price index released Thursday by the Bureau of Labor Statistics.
Forecasters had expected that inflation would rise to 3.1%. Thursday’s report is the first after the end of the government shutdown, which caused key employment and inflation data to be delayed. The last report was for the month of September, as October’s report was canceled. The CPI’s release was closely anticipated by the Federal Reserve and investors.
MAJOR BIPARTISAN BILL TO COUNTER HOUSING CRISIS ADVANCES IN HOUSE
The lower inflation reading suggests that the price pressures from President Donald Trump’s tariffs were not as strong as originally feared, data that will undoubtedly be touted by the Trump administration, which has embarked on a historically aggressive tariff agenda.
Core inflation, a measure that strips out volatile food and energy prices, fell four-tenths of a percentage point a 2.6% annual rate.
In the month of November alone, prices rose 0.2%.
This latest CPI reading adds to other economic data that has been trickling in since the government shutdown ended after a record 43 days.
The Federal Reserve’s preferred inflation gauge, the personal consumption expenditures index, showed inflation rising one-tenth of a percentage point to 2.8% for the year ending in September.
The Fed is closely tracking all of the inflation data, given it has a dual mandate: price stability and maximum employment.
Recent employment reports have shown job growth slowing. Still, underlying strength in the labor market has restrained the Fed from loosening monetary policy quickly.
The economy added 64,000 jobs in November, and the unemployment rate rose to 4.6%, the Bureau of Labor Statistics said Tuesday. Job growth in recent months appears to be running below the rate needed to keep unemployment from rising.
TRUMP WANTS NEXT FED CHAIR TO CONSULT WITH HIM ON INTEREST RATES AND GET THEM DOWN TO 1%
The Fed last met earlier this month and decided to cut its rate target by another quarter of a percentage point. Still, most investors expect the Fed will hold rates steady at its next meeting in January, according to the CME Group’s FedWatch tool, which calculates the probability using futures contract prices for rates in the short-term market targeted by the Fed.
Trump has been pushing the Fed hard to lower interest rates and he will get the chance to nominate a replacement for Fed Chairman Jerome Powell next year, a replacement that will likely share the president’s vision for lowering the Fed’s rate target.
