U.S. Core Inflation Modest in November Ahead of Fed Meeting
An employee passes in front of a Starbucks Corp. Coffee location inside a Kroger Co. supermarket in Louisville, Kentucky, U.S. (Photographer: Luke Sharrett/Bloomberg)

U.S. Core Inflation Modest in November Ahead of Fed Meeting

(Bloomberg) --

A key measure of U.S. consumer prices remained subdued in November, bolstering widespread expectations Federal Reserve policy makers will hold the line on interest rates.

The core consumer price index, which excludes volatile food and energy costs, rose 0.2% for a second month, and 2.3% from a year earlier, a Labor Department report showed Wednesday. Those figures matched the median estimates in a Bloomberg survey of economists. The broader CPI increased 0.3%, and 2.1% from November 2018.

U.S. Core Inflation Modest in November Ahead of Fed Meeting

The contained pace of inflation supports forecasts that the Fed will hold interest rates steady when policy makers convene this afternoon. Central bankers have cut borrowing costs three times this year and signaled they will remain on hold for the near future or until the economic outlook shows a material change.

The Labor Department’s CPI tends to run higher than the Commerce Department’s personal consumption expenditures price index, which the Fed officially targets. The core PCE index that policy makers watch for a better read on underlying price trends has softened in recent months and has held below the 2% objective all year.

Inflation Expectations

What’s more, consumers expect minimal price pressures over the longer term. The University of Michigan’s measure long-term inflation expectations matched a record low in the preliminary December survey.

The Labor Department’s CPI report showed energy and shelter were the primary factors boosting November inflation. Energy prices rose 0.8% from the prior month on the back of higher gasoline and fuel oil costs.

Shelter costs, which make up about a third of total CPI, accelerated, rising 0.3% last month after a 0.1% gain in October. The price of lodging rose 1.1% after slumping 3.8% a month earlier.

Owners-equivalent rent, one of the categories that tracks rental prices, increased 0.2%.

Food prices edged up 0.1%, while the cost of new vehicles declined for a fifth consecutive month.

Apparel prices, which tend to be volatile on monthly basis, crept up 0.1% in November after declining the previous two months.

A separate Labor Department report Wednesday showed average hourly earnings, adjusted for price changes, rose 1.1% in November from a year earlier after a 1.4% in the 12 months through October. Higher inflation erodes wage gains.

Economists surveyed by Bloomberg had forecast the core CPI to rise 0.2% from the prior month and 2.3% from a year earlier, with the broader index seen rising 0.2% and 2% on a yearly basis.

©2019 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.