USA: Inflation slows slightly in November, the Fed remains cautious

According to data released by the Labor Department on Tuesday, prices in the United States continue to gradually move toward a return to normality after another slowdown in November, even as the Federal Reserve (Fed) has to begin its monetary policy meeting.

At the end of November, inflation reached 3.1% in a year, slightly lower than in October, when it was 3.2%, according to the CPI index, to which Americans’ retirement pensions are indexed.

Core inflation, which excludes volatile food and energy prices, remained stable at 4.0% year-on-year compared to October, but at its lowest level in more than two years.

In a statement, US President Joe Biden highlighted “continuous progress in returning inflation to more acceptable levels and reducing Americans’ cost of living,” recalling that inflation “has fallen by two-thirds compared to its peak” in June 2022 has sunk.” .

For her part, US Treasury Secretary Janet Yellen, during a conference in Washington, said she was pleased that inflation was “on a clear slowing trend” and said that at the current rate there was “no reason” not to see one Return to the Fed’s 2% target.

“This is the first time in a year that underlying inflation has not slowed. The bad news is that underlying services inflation (which excludes rents, editor’s note) rose 0.5% month over month. And housing remains shockingly expensive,” Oxford Economics chief economist Michael Pearce stressed in a note.

Within a month, consumer prices rose slightly by 0.1%, just above analysts’ expectations, who instead expected prices to stabilize further after what was observed in the previous month.

Fuel prices are the main driver of the observed slowdown, with costs at the pump continuing to fall over a year but also month-to-month, good news for American consumers who are particularly sensitive to fluctuations in this product.

Food prices also continue to slow sharply, with an increase of 2.9% in a year, but only 1.7% for food eaten at home, with the increase being greater for take-away or catering meals (+5 .3%).

Among other sectors seeing price declines, used cars and healthcare services are also declining, again good news for American consumers.

The Fed remains cautious

Conversely, despite a slowdown, certain sectors record price increases that are always above the index. This is particularly true for housing construction, where the transmission of the price increase initially and then the slowdown only becomes noticeable with a delay.

Likewise, the transport sector continues to face price increases of more than 10% in a year, fueling service price inflation.

The CPI index confirms the trend observed by the other price index in the United States, the PCE, preferred by the Federal Reserve (Fed) to determine its monetary policy, which ended the month of October with an increase of 3% over one ended the year, again in constant decline.

The issue of a return to normal inflation is a key issue for Joe Biden, who began his re-election campaign by highlighting his economic successes, while the country’s economic growth is the strongest among G7 nations and unemployment has reached its lowest level since the pandemic .

But various opinion polls underline that Americans do not believe the outgoing president will be successful on the economic front, largely due to the impact of rising prices on household budgets, even though salaries tend to rise with a lag.

Faced with an increase in prices that was close to 10% (+9.5%) in July 2022, the Fed had decided to gradually raise its interest rates starting in March 2022, making access to credit more expensive for economic agents, theoretically slowing down consumption and investment and thus protect the economy in order to avoid a price increase.

The Fed begins its final currency meeting on Tuesday to decide whether to raise interest rates again, after two meetings holding them at their current level in a range between 5.25% and 5.50%.

The Monetary Policy Committee’s decision will be announced at 2 p.m. (1900 GMT) on Wednesday, but the vast majority of analysts already expect interest rates to remain on hold, according to monitoring tool CME FedWatch.