According to consensus forecasts, the U.S. Consumer Price Index (CPI) for November is expected to rise significantly for the fourth consecutive month, indicating that progress in reducing inflation is stagnating.
The median estimate from a Bloomberg survey shows that the so-called core CPI, excluding food and energy, is expected to rise by 0.3% month-over-month in November, marking the fourth consecutive month at this level, with overall indicators also expected to show a similar increase.
U.S. core inflation in November will remain strong for the fourth consecutive month.
The CPI and the Producer Price Index (PPI) report to be released on Thursday will be the last opportunity for Federal Reserve officials to focus on inflation data before next week's policy meeting. Although traders largely still expect the Federal Reserve to lower rates for the third consecutive time, a series of strong inflation data could prompt it to slow the pace of rate cuts in the future.
Brett Ryan and his team of economists at Deutsche Bank stated in a report on Monday, "If the inflation data is roughly in line with expectations, we expect the Federal Reserve to lower interest rates again next week. However, we expect the message conveyed at the meeting will emphasize a more gradual pace of easing in the future."
Inflation target may be delayed.
Despite the U.S. inflation rate having fallen significantly from the post-COVID peak, it has remained stagnant in recent months. In light of this, policymakers are trying to strike an appropriate balance between ensuring inflation returns to the 2% target and keeping the economy and labor market running at a healthy pace.
Although the Federal Reserve's inflation target is based on different indicators—the Personal Consumption Expenditures Price Index (PCE)—it closely monitors the trajectory of the CPI, especially since it is the first official inflation report released each month. The November PCE report will be released after the Federal Reserve meeting.
Bloomberg Economics economists Anna Wong and Chris G. Collins stated, "We expect prices for core goods to rise faster (up 0.3% month-over-month in November, compared to the previous month being flat), particularly for used cars. Given the unfavorable seasonal factors in the used car market this fall, a significant month-over-month drop in prices is needed to maintain anti-inflation momentum. We estimate that used car prices will rise by 1.2% month-over-month in November (previously 2.7%), marking the third consecutive increase after a decline for most of this year. New car prices may rise by 0.4% month-over-month (previously 0%)."
In recent months, some categories that have typically contributed to broader anti-inflation trends have weakened their push to reduce inflation. Many economists expect that due to rising prices for used cars and clothing, core goods prices will rise for the third consecutive month in November, after mostly falling for much of the previous year. Housing and auto insurance are also seen as factors contributing to high inflation.
"The final stretch of the journey to bring inflation back to the Federal Reserve's target looks increasingly difficult," said Wells Fargo economists Sarah House and Aubrey Woessner in a report. They expect that achieving the Federal Reserve's 2% target will be delayed until 2026, with progress over the next year being negligible.
The Trump effect may hinder the cooling of inflation.
The Wells Fargo team and others also believe that with the incoming President Trump returning to the White House, inflation may face new resistance.
Although consumer perceptions of the economy and financial situation have improved since the election on November 5, some of his campaign promises—including tax cuts and punitive tariffs—are believed to potentially push inflation higher. For example, some businesses are considering raising prices in response to higher tariffs.
Bank of America economists Stephen Juneau and Jeseo Park wrote, "From a fundamental perspective, we believe there are no significant upside risks to inflation: the labor market has rebalanced, supply constraints have largely dissipated, and inflation expectations remain stable... That said, given our expectations for changes in tariffs, fiscal policies, and immigration policies, progress in reducing inflation next year should stall."
Article reposted from: Jin Shi Data