U.S. Bureau of Labor Statistics CPI report for December 2024

U.S. Inflation Climbs to 2.7% in November, Highest Since July; Markets Price 97% Chance of Fed Rate Cut

Dec 11, 2024, 01:39 PM

U.S. consumer prices rose by 2.7% year-over-year in November, matching economists' expectations and marking the highest inflation rate since July 2024 and the second consecutive month of increasing inflation. The Consumer Price Index (CPI) increase is up from 2.6% in October and 2.4% in September. Core CPI, excluding volatile food and energy prices, remained steady at 3.3% year-over-year for the fourth consecutive month. The monthly CPI rose 0.3% in November, consistent with forecasts. Market participants noted that inflation remains above the Federal Reserve's 2% target, with inflation appearing to have "leveled off" above this benchmark. Despite the continued rise in inflation, the in-line data has bolstered expectations of a 25 basis point interest rate cut at the upcoming Federal Open Market Committee meeting on December 18. Futures markets are now pricing in a 97% chance of a rate cut, up from 65% a month ago and 86% prior to the CPI release. Analysts observed that the continued rise in inflation could signal challenges in the Fed's efforts to bring down price pressures, with some expressing concerns about the "last-mile progress" and inflation's "stickiness." Supercore CPI, which excludes food, energy, and shelter, rose 0.342% month-over-month, up from 0.313% previously. Despite these concerns, the consensus is that the CPI data likely does not alter the trajectory for monetary policy in the near term.