The pace of US consumer price growth is set to have slowed again in November in a further sign that price pressures are beginning to ease in some sectors of the world’s largest economy.
The consumer price index (CPI) is forecast to have slowed to an annual pace of 7.3 per cent, down from 7.7 per cent in October and the lowest level since December 2021, according to a consensus estimate compiled by Refinitiv Eikon.
Compared to the previous month, overall CPI is expected to have risen 0.3 per cent, slightly less than the 0.4 per cent increase registered in October.
The “core” measure, which strips out volatile energy and food costs, is also poised to decline, rising on an annual basis by 6.1 per cent. That would mark a deceleration from October’s 6.3 per cent increase, despite the monthly rise remaining steady at 0.3 per cent.
The data, set to be released by the Bureau of Labor Statistics at 8:30am Eastern Time on Tuesday, come at the start of the Federal Open Committee’s final two-day policy meeting of the year.
On Wednesday, the US central bank is set to raise its benchmark policy rate by half a percentage point, breaking a months-long streak of 0.75 point interest rate increases and marking the start of the next phase of policy tightening.
With that increase, the federal funds rate will move up to a new target range of 4.25 per cent to 4.5 per cent, which most officials believe is not high enough to bring inflation back down to the Federal Reserve’s longstanding 2 per cent target.
FOMC members and other regional bank presidents are expected on Wednesday to signal support for the policy rate reaching between 4.75 per cent and 5.25 per cent next year and for that level to be maintained until at least 2024. There is likely to be a slight preference for the so-called “terminal” rate settling at between 5 per cent and 5.25 per cent, suggesting interest rates will continue to rise through to March.
That compares to the 4.6 per cent peak rate officials anticipated in September, the last time individual forecasts were published. Accounting for the change in expectations is a recognition that inflationary pressures are going to be harder to root out than expected.
Energy and goods prices have begun to slow this year, having previously helped to push up the annual increase in the CPI index to 9.1 per cent in June. But services-related costs have risen at an alarming pace, bolstered in part by an acceleration in wage growth as a result of the surprisingly resilient labour market.
Fed officials have acknowledged that getting inflation under control will require a sustained period of low growth as well as higher unemployment, but have stopped short of forecasting an outright recession. Most economists say an economic contraction will be necessary and anticipate a mild one next year.
