A key indicator of US inflation has edged down in welcome news to households grappling with soaring costs.
This extends a downward inflation trend in recent months as officials try to cool the American economy, the world's largest, though it is unlikely to bring quick relief from an aggressive campaign to rein in prices.
The US Federal Reserve's preferred inflation measure, the personal consumption expenditures (PCE) price index, rose 5.5 percent last month from November 2021, Commerce Department data showed.
This was slightly below October's level but remains significantly higher than policymakers' target of two percent inflation.
From October to November, the PCE price index increased 0.1 percent, boosted by food prices.
The US Federal Reserve's preferred inflation measure, the personal consumption expenditures (PCE) price index, rose 5.5 percent last month from November 2021. The index is a key indicator of inflation and remains significantly higher than the target of two percent
The PCE is Federal Reserve's preferred inflation measure. Inflation rates are cooling but still remain worryingly high and analysts expect another interest rate hike in 2023
Analysts warned that interest rates could rise again in 2023 as the Fed maintains an 'aggressive policy stance'.
Oren Klachkin of Oxford Economics said: 'The recession isn't here today but one will arrive next year.'
Paul Nolte, a portfolio manager at Kingsview Asset Management, added: 'The equity markets have it wrong in that they think the Fed is going to stop and eventually cut interest rates later in 2023. And, right now, I don't see that happening anytime soon.'
New data also reveals expenditures appear to be 'softening' with a drop in auto spending, although spending on services shows few signs of faltering just yet, said Ian Shepherdson of Pantheon Macroeconomics.
Inflation in the US continues to moderate, rising at an annual rate of 7.1 percent in November in the fifth-straight month of declines
Household spending, which has proven resilient in the face of decades-high inflation, jumped 0.1 percent from October to November, official data showed.
While there may be holiday distortions to the latest figures, 'it seems reasonable to expect people to become more cautious', Shepherdson added.
This is because consumers would have 'run down about half of their accumulated pandemic savings, and labor market conditions are softening', he said.
Meanwhile, personal incomes rose 0.4 percent from October.
'High interest rates and elevated inflation caused consumers to take a breather on spending in November, but income gains and excess savings offered support,' said Klachkin.
Consumer prices have surged this year, exacerbated by supply chain snarls and Russia's invasion of Ukraine, leading the Fed to hike interest rates rapidly in hopes of easing demand.
The central bank has raised the benchmark lending rate seven times this year, with higher borrowing rates already battering sectors like housing.
But spending has been resilient and prices remain stubbornly high.
Inflation may be expected to 'retreat' next year, but it should stay well above the Fed's target and 'keep the central bank in an aggressive policy stance', said Klachkin.
The Federal Reserve raised its benchmark interest rate by half a percentage point last Wednesday (December 14), one day after inflation figures showed prices up 7.1 percent year-over-year.
Fed Chair Jerome Powell has said he is tracking price trends in three different categories to best understand the likely path of inflation: Goods, housing, and services
The hike was smaller than the Fed's last four straight jumbo 0.75 percent hikes.
The latest increase was the seventh this year and set rates at 4.25 to 4.5 percent, the highest in 15 years - further increasing borrowing costs for businesses and consumers.
Chair Jerome Powell, who is leading the central bank on a tight line between tamping down inflation and triggering a recession, promised there would be 'some pain' for Americans as the Fed tried to cool off the market.
'Our overarching focus is using our tools to bring inflation back down to our 2% goal,' Powell said.
Powell said the peak benchmark interest rate could reach 5 percent. 'Restoring price stability will likely require maintaining a restrictive policy stance for some time,' said Powell.
The Fed chair was asked about predictions showing the unemployment rate rising to 4.6 percent by 2023 year-end, compared to 3.7 percent now.
'I don't think it would qualify as a recession,' he said, adding that he still thought 4.6 would qualify as a 'strong labor market.'
He noted that median GDP growth is expected to be just 0.5 percent for both this year and next, but insisted that prediction does not qualify as 'recessionary.'
November's 7.1 percent annual inflation rate was lower than economists had expected and marked the lowest 12-month increase since December 2021.
English (United States) ·