Inflation cooled to a 2.6% annual rate in November, as measured by the gauge favored by the Federal Reserve, declining 0.3 percentage points from the previous reading.
The slowdown in the personal consumption expenditures price index reported Friday morning by the Bureau of Economic Analysis is more good news as the Fed works to quash inflation by keeping interest rates elevated. The consensus among economists was that PCE inflation would fall to 2.8%.
CONSUMER CONFIDENCE BLOWS PAST EXPECTATIONS, SURGES BY MOST SINCE EARLY 2021
Core PCE inflation, a measure of inflation that strips out volatile energy and food prices, fell to a 3.2% year-over-year rate.
The Fed’s target is 2% annual price growth.
The drop in headline inflation last month is also welcome news for President Joe Biden. The White House has been touting the declines in inflation alongside the strong labor market as “Bidenomics” at work.
Other recent inflation reports for last month showed declines.
Inflation, as measured by the consumer price index, fell by a tenth of a percentage point to 3.1% for the year ending in November. A share of that decrease was due to declining energy prices, which had been putting upward pressure on the headline CPI number. On a month-to-month basis, CPI inflation growth was at 0.1%, which was a bit higher than forecasters had expected.
Additionally, wholesale inflation, as measured by the producer price index, declined three-tenths of a percentage point to 0.9% for the year ending in November.
Because of the recent progress, the Fed is now eyeing a pivot. The central bank has held interest rates where they are since July but now appears on the verge of cutting rates, with the first cut expected as soon as the first quarter of next year.
Fed officials, who stress they could still raise rates even more if inflation proves too sticky, have penciled in three rate cuts next year, although investors think there will be up to six downward revisions.
Outside of inflation, other parts of the economy have proven solid despite over a year of higher interest rates.
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GDP expanded at a 4.9% seasonally adjusted annual rate in the third quarter of this year, it was announced this week — that marks the strongest growth since the country’s pandemic rebound.
The labor market has also remained above water. The economy broke expectations again last month and added nearly 200,000 jobs. The unemployment rate also dropped slightly to 3.7%, right around where it was in the months before the pandemic.