Annual inflation slowed to 7.1% in November, the Bureau of Labor Statistics reported Tuesday, a sign that the price pressures that have wracked the economy over the past year are easing.
The much-anticipated numbers revealed that, while inflation is still excruciatingly high, it is starting to cool in response to the Federal Reserve’s aggressive interest rate hikes. Inflation had been 7.7% the month before.
While there had been some question about whether the trend of monthly declines in the all-items inflation rate would continue, Tuesday’s report marks five straight months of declines in annual inflation after the rate peaked at a whopping 9.1% in June.
“It’s important to remember that prices are still rising. Inflation remains too high and the Fed remains nervous. Even as prices moderate, they’re still much higher than pre-COVID levels,” Victor Claar, associate professor of economics at Florida Gulf Coast University, told the Washington Examiner. “While consumer prices are moderating, the Fed can’t relax because of persistent tightness in the labor market.”
CHILD TAX CREDIT FANS GAIN MOMENTUM IN GOP INFIGHTING OVER ECONOMICS
“Core inflation,” which strips out volatile food and energy prices, also eased in November to 6%.
While the prices for most goods and services are elevated, the index for shelter was the largest contributor to the monthly inflation as it more than offset decreases in energy indexes.
The higher prices are hitting consumers hard. The rising cost of food, in particular, has been difficult for many households. The price of chicken has risen 12% over the last year, while dairy products have increased by more than 16%.
Meanwhile, energy prices have risen by about 13% just in the past year, and people in many places, especially in cold New England, are facing the prospect of major bills heating their homes this winter.
The Fed has been aggressively jacking up interest rates to tame inflation. Raising rates, though, slows demand and can result in recessionary conditions.
Last month, the central bank conducted another huge three-quarters of a percentage point, or 75 basis points, rate increase. It was the fourth such increase in just five months — the largest increase in four decades.
All eyes are on this week’s inflation report as it comes on the first day of a two-day meeting of top Fed officials to discuss the scope of this month’s rate hike. Most Fed watchers are expecting a bit softer of a hike, likely 50 basis points, as it appears inflation is decelerating, and officials want to avoid causing the country to careen into a recession.
Recent comments by Fed Chairman Jerome Powell have also indicated that the pace of the tightening will begin to slow.
“The full effects of our rapid tightening so far are yet to be felt,” Powell said during a speech at the Brookings Institution. “Thus, it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down.”
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
“The time for moderating the pace of rate increases may come as soon as the December meeting,” he added.
The Fed will announce its decision on how much it will hike rates after the Federal Open Market Committee meeting concludes on Wednesday afternoon.
