Inflation moved up for the second month in a row, rising a tenth of a percentage point to 2.7% for the year ending in November, the Bureau of Labor Statistics reported Wednesday in an update to the consumer price index.
Rising inflation is unwelcome news for President-elect Donald Trump, who will soon inherit the economy from President Joe Biden. It suggests the price pressures that afflicted the country throughout Biden’s tenure have not fully abated.
On a month-to-month basis, inflation rose 0.3%.
Inflation was the biggest concern on the campaign trail and a major factor in Trump besting Vice President Kamala Harris last month.
Food prices rose in November, bringing the headline CPI number higher. The 2.4% year-over-year increase was the biggest since January.
Core CPI inflation, which strips out volatile food and energy prices, remained at 3.3% for the year ending in November.
Officials at the Federal Reserve are watching the inflation numbers closely to determine whether to lower interest rates further to spur more economic activity or to forgo further rate cuts to try to tamp down inflation. The Fed met shortly after the election and decided to lower its interest rate target by a quarter of a percentage point. The Fed’s goal is 2% annual inflation.
The Fed looks at another inflation gauge, the personal consumption expenditures index, when analyzing its next steps. The PCE index for October showed PCE inflation rising to 2.3%. And core inflation rose to a 2.8% year-over-year rate.
“It is increasingly obvious that Fed officials cannot continue to say with confidence that they expect inflation pressures to moderate and for inflation to continue moving down lower to the 2.0% target next year when inflation has not shown any directional movement towards a slowdown or cooldown or whatever you want to call it for several months now,” said Chris Rupkey, chief economist at FWDBONDS.
Despite interest rates remaining high, the labor market has proven resilient — although it has shown some signs of cooling in recent months.
The economy added 227,000 jobs in November, and the unemployment rate rose a tenth of a percentage point to 4.2%, the Bureau of Labor Statistics reported last week. That came after a shock jobs report in October showed just 12,000 jobs being added, a number that was later revised up to a still-low 36,000.
Trump will enter office with a resilient, although slowing, labor market.
It is helpful to look at the overall trend for the labor market. The three-month moving average of job gains rose in November to 173,000, above the rate needed to keep up with population growth.
The president-elect will also inherit an economy with strong growth.
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The economy grew at a 2.8% annual rate, adjusted for inflation, in the third quarter of this year, just under the 3% rate the quarter before, the Bureau of Economic Analysis recently reported. GDP growth has remained relatively robust this year despite headwinds, such as high interest rates from the Fed.
All eyes will be on the Fed next week when it decides whether to cut interest rates once again. Most investors expect the central bank will cut interest rates.
