A decline in US prices for gas and used cars in November led to a marked slowdown in inflation, with prices for all goods and services rising just 0.1% from the prior month.
Piped gas for utilities fell by 3.5%, used cars fell by 2.9%, and gasoline fell by 2%. Additionally, medical services fell by 0.7% and electricity fell by 0.2%, offset by increases for items such as shelter and food.
The annual inflation rate, meanwhile, came down from 7.7% in October to 7.1% in November.
It’s unlikely that the encouraging data will change how the Federal Reserve hikes interest rates tomorrow, but it’s an additional good inflation data point that will help the Fed slow down in the future.
“In one sense this is the lowest-stakes CPI print we’ve had in a while,” said Skanda Amarnath, executive director at Employ America, a labor advocacy organization. “The Fed has pretty much locked in 50 basis points.”
Shelter inflation has remained high in CPI, rising by 0.6%, but disinflation is also coming for this category as asking rents fall.
Food inflation decelerated from 0.8% two months ago to 0.5% now and will ease further as lower commodity prices reach grocery store shelves.
The overall 0.1% in price increases in November was much lower than the 0.3% that economists had expected and slower than the 0.4% increase in October.
The federal funds target rate is between 3.75% and 4%. With several 0.75 percentage point increases, the Fed has raised the rate from near zero starting in March of this year. Tomorrow, the Fed is expected to slow down its pace of hikes with a 0.5 percentage point hike.