Dec 12, 2023 - Economy

November's inflation data is not as benign as it seems

Illustration of a worried emoji with an upward trend line as the mouth.

Illustration: Allie Carl/Axios

The inflation story of late has been straightforward: Price pressures were easing nearly across the board, boosting hopes that the inflation war was just about won.

Why it matters: The worst of the crisis is in the past. Still, inflation's total return to normal might remain bumpy.

Driving the news: Overall inflation kept cooling last month, largely thanks to cheaper gas prices. But excluding volatile energy and food, core CPI revealed stubbornly firm price increases.

  • The details of Tuesday morning's CPI report, however, add nuance to the narrative.

The bumpy return to normal might be a harsh reality for everyone, from consumers fed up with inflation to a Biden administration plagued by voter discontent.

  • It shows how Federal Reserve officials have been reluctant to declare the battle against inflation is over — and why they are likely to push back on the possibility of an early 2024 interest rate cut following a two-day policy meeting that began Tuesday morning.

By the numbers: Overall CPI rose 0.1% in November as dropping gasoline prices dragged the overall index down. Over the past 12 months, the index is up 3.1% — down a tick from October.

  • But while the headline drifts steadily lower, the core measure — watched for signs of underlying price pressures — looks stuck beneath the surface, By some measures, it's pushing higher.
  • For instance, the index rose at a 3.4% annualized pace over the past three months. As recently as August, it was 2.4% by this measure.

Flashback: Last year, the Fed flagged a cut of the data that they were watching closely for signs of sticky inflation — "supercore," which is services excluding shelter, energy and food prices.

  • Progress in that area reversed in November: It increased 0.4%, double the pace of October, according to calculations by economists at William Blair.

What they're saying: "This will not have any meaningful impact on [Wednesday's] likely decision to hold rates steady, but it provides the Fed some ammunition to reiterate that rate cuts as early as March 2024 remain premature," Olu Sonola, head of U.S. regional economics at Fitch, wrote.

  • "The trend is still undoubtedly encouraging, but the fine details here will sow some doubts."
Go deeper