NEW YORK – United States inflation picked up in November thanks to a jump in energy prices yet unexpectedly cooled when excluding food and fuel costs, which could factor into Federal Reserve discussions this week on how fast to raise interest rates.
The consumer price index rose 0.4 percent from the prior month, matching the median estimate of economists, a Labor Department report showed Wednesday. Excluding food and energy, the so-called core gauge increased 0.1 percent from October and 1.7 percent from a year earlier, missing median projections by 0.1 percentage point.
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The figures indicate that outside of energy, inflation is still having trouble gaining momentum, though Fed policy makers have said transitory factors are probably holding down prices. Even with below-target inflation, central bank officials are widely projected to raise borrowing costs a third time in 2017 at their two-day meeting that wraps up later on Wednesday.
Including all items, the CPI rose 2.2 percent from a year earlier, matching the median estimate of analysts and accelerating from October’s 2 percent gain.
The slowdown in core inflation can be partly attributed to the shelter index’s rise of 0.2 percent from the previous month, the lowest since July. Shelter accounts for about one-third of the headline index. In addition, the medical care index was unchanged after a reported 0.3 percent gain in October, while apparel prices fell 1.3 percent, the biggest drop since 1998.
Rate Path
While economists and investors see a Fed interest-rate hike on Wednesday as a near-certainty, the softer details of the latest CPI report could play a role in the timing and number of rate increases in 2018. Policy makers on Wednesday are set to update their economic projections for next year, after the previous forecasts in September showed a median estimate of three rate increases in 2018.
The central bank’s preferred gauge of inflation – a separate figure based on consumer purchases and issued by the Commerce Department – has mostly missed its 2 percent goal in the past five years. The measure excluding food and energy is also below the Fed’s target. November figures for those indexes will be released Dec. 22.
Economists expect that steady demand in the U.S. and abroad and the tightening job market will boost pricing power for businesses over time. Yet that would also crimp purchasing power for consumers, who have benefited from contained inflation throughout this expansion, especially as wage growth has been weak.
The CPI is the broadest of three price gauges from the Labor Department because it includes all goods and services. About 60 percent of the index covers the prices that consumers pay for services ranging from medical visits to airline fares, movie tickets and rents.
Other Details
- Energy prices rose 3.9 percent from the previous month, including a 7.3 percent rise in gasoline; food costs were unchanged
- Shelter costs include 0.2 percent increase in owners- equivalent rent, one of the categories designed to track rental prices; lodging away from home fell 1.3 percent after three straight gains
- Used-vehicle prices, which had climbed in October after nine consecutive monthly declines, posted a 1 percent gain last month; the CPI for new vehicle costs was up 0.3 percent
- Wireless-phone service prices rose 0.3 percent; airfares fell 2.4 percent, biggest decline since June
- Hourly earnings adjusted for inflation rose 0.2 percent from November 2016, according to a separate report from the Labor Department
Shobhana Chandra is a reporter for Bloomberg News.
