November CPI Cools Down to 7.1%: Fed Expected to Slow Rate Hikes
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November CPI Cools Down to 7.1%: Fed Expected to Slow Rate Hikes

Annual and monthly inflation rose by 7.1% and 0.1% in November, compared to analysts' estimates of 7.3% and 0.3%, respectively.
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Year-over-year inflation in November 2022 stood at 7.1%, the latest CPI print showed. Month-over-month, consumer prices increased by 0.1%, while annual core CPI stood at 6.0%.

Core CPI Eased to 6.0%

The annual inflation rate slowed to 7.1% in November, according to the latest consumer price index (CPI) reading released Tuesday. The print compares to analysts’ expectations of 7.3% and the October print of 7.7%.

On a monthly basis, inflation increased by 0.1%, while analysts were looking for a 0.3% increase. The month-over-month data is also slower than the 0.4% increase in the previous two months amid a decline in prices.

Core inflation, which disregards volatile food and energy prices, stood at 6.0% in November, compared to consensus estimates of 6.1% and October core CPI of 6.3%. Month-on-month, core inflation rose by 0.2% this month, while analysts expected a 0.3% increase.

US stocks are higher in premarket trading as investors hoped for cooler inflation data. Benchmark S&P 500 is up 1.43%, while Dow Jones Industrial Average (DJIA) and the Nasdaq Composite rose by 1.58% and 1.26%, respectively.

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Fed Likely to Deliver First 50 BPS Hike After Four Months

The latest CPI announcement comes as a part of the two-day Federal Reserve policy meeting on Dec. 13 and Dec. 14. After today’s inflation data, the US central bank is expected to announce its interest rate hike decision on Wednesday.

Analysts and investors expect the Fed to deliver a slower interest rate hike of 50 basis points (bps) tomorrow after delivering four consecutive jumbo 75 bps hikes. Economists believe the Fed will keep raising interest rates until the fed funds target rate hits 5% or slightly higher.

After months of rampant inflationary pressures, Fed policymakers now feel comfortable slowing the pace of interest rate hikes as monetary policy is tight enough to pull the brakes on the US economy. However, the Fed is still expected to increase its benchmark federal funds rate, which affects how much consumers earn when they save and how much they pay when borrowing.

Bankrate chief analyst Greg McBride said, “interest rates will peak in 2023, but that doesn’t mean they’ll come down in any meaningful way either.” Rates increased rapidly in 2022, and “next year is going to be a year where rates level off — but they’re going to level out at a higher altitude than where they are right now.”

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How long do you think it will take the Fed to bring down inflation to the 2% target? Let us know in the comments below.