The roadmap is maintained. Inflation has cooled over the last year and a half, but price stability is fighting back. According to November inflation data published this Tuesday by the Bureau of Labor Statistics, prices in the United States rose 3.1% over the last 12 months, a tenth less than the previous month. Core inflation, which excludes energy and food purchases, is still at 4%. The figures will be released on the same day that the Federal Reserve's Monetary Policy Committee begins a two-day meeting on interest rates. They are expected to remain at 5.25% to 5.5%, the highest level since March 2001.
Energy prices fell by 5.4% last year, largely due to a 9.8% reduction in gasoline prices. The increase in food has also moderated, particularly home food, which has become more expensive by 1.7% over the last 12 months, while the price of eating out has increased by 5.3%.
In October, the monthly price increase was 0.1%. The housing index continued to rise in November, offsetting the decline in the gasoline index. The energy index fell 2.3% for the month, driven by a 6.0% decline in gasoline. Core inflation rose by 0.3% monthly in November and stands at the above-mentioned 4%, a value that doubles the price stability target of 2%.
Inflation in the United States has not been below 3% since March 2021. The recovery in demand after the pandemic, with expansionary fiscal and monetary policies, and supply problems, with supply chain congestion and difficulties in regaining momentum Activity led to a rise in prices. The situation was made worse by the war in Ukraine, which made oil, food and other raw materials more expensive. Inflation peaked at 9.1% in June 2022, the highest in four decades, fueling the perception among Americans that the economy is doing poorly, despite strong job creation, growth resilience and picking up Multi-million dollar investments.
Since that peak in mid-2022, inflation has fallen continuously for 12 months, reaching 3.0% last June. The rise in gasoline prices caused prices to rise again in August and September, only to slow again to 3.2% in October.
The final step toward the 2 percent target is the most complicated for monetary policymakers, who have been trying for more than a year to achieve the economy's desired soft landing: controlling prices without causing trouble for the economy. bloated recession.
The Federal Reserve has not raised interest rates since July, but has managed to keep the market on tenterhooks with its repeated warnings that it is prepared to raise rates if inflation does not fall to the 2 percent target . While it's possible Powell will reiterate that message again this Wednesday, the market is starting to think he's bluffing a bit. Keeping this option open allows you to avoid the question of downsides, but that's what the market is focused on.
This Wednesday, in addition to the decision on interest rates (there is virtually unanimity that it will not be changed), the Federal Reserve will publish the estimates of the members of its Monetary Policy Committee on what the price of money will be at the end of 2024, 2025 and 2026. Investors are focused on seeing the pace of interest rate cuts that the central bank expects, although it is just a forecast that does not commit them to anything. In fact, they are often wrong when predicting what they will do.
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