November CPI: Going nowhere fast
Summary
November's CPI report delivered more evidence that progress in lowering inflation has stalled. Consumer prices rose 0.3%, pushing the 12-month change up to 2.7%. While a pickup in prices for food and gasoline contributed to the headline's strength, excluding food and energy price growth also remained firm. The core index advanced 0.3% for a fourth consecutive month. Deflation among core goods showed further signs of petering out, while disinflation among core services remained painstaking slow despite a notable moderation in primary shelter inflation.
Today's inflation data probably do not represent a sea change in the outlook for the Federal Reserve. Over the course of 2024, inflation has continued to slow, albeit more gradually than many had hoped it would at the start of the year. Furthermore, supply and demand in the labor market has come into balance, and we do not view the labor market as a source of inflationary pressure in 2025. We believe the FOMC will continue to reduce the federal funds rate next year in an effort to move monetary policy to a less restrictive position. We look for 100 bps of rate cuts from the FOMC over the next 12 months, with 25 bps rate cuts at next week's FOMC meeting and the March, June and September meetings next year.
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