US inflation cools to 2.7% in November in first report after shutdown
US inflation showed signs of cooling in November, marking a slight slowdown from the previous months which were impacted by a government shutdown that disrupted data collection.
According to the Bureau of Labor Statistics, the Consumer Price Index rose 2.7% in November over the past 12 months, down from 3% in September and below expectations of a 3.1% increase.
The Core Consumer Price Index, which excludes volatile food and energy prices, increased by 2.6% over the same period, falling short of the anticipated 3% rise.
The November inflation report did not include monthly figures due to the cancellation of the October report during the government shutdown.
Federal Reserve Chairman Jerome Powell cautioned that the shutdown may distort upcoming economic data and should be viewed with caution.
The lower-than-expected inflation figure raised hopes among investors that the Fed would continue to ease monetary policy.
The Dow Jones Industrial Average rose by 162 points, or 0.3%, while the S&P 500 and Nasdaq increased by 0.7% and 1%, respectively, by around 9:50 a.m. ET.
Last week, the Federal Reserve cut interest rates for the third time this year in response to price pressures, despite concerns about a weakening labor market.
While the Fed aims to keep inflation at 2%, Powell suggested that President Trump’s tariffs would likely have a one-time impact on prices.
However, questions remain about the extent of the price increase due to tariffs, as businesses have been absorbing additional costs for months and pre-tariff inventories are now dwindling.
In November, prices of tariff-sensitive goods like furniture and bedding rose by 3% over the year, while appliances and apparel saw smaller increases of 0.5% and 0.2%, respectively.
“It’s really tariffs that are causing most of the inflation overshoot,” Powell stated last week when addressing the issue of inflation.
Additionally, the jobs report released earlier in the week indicated steady hiring in November, but the unemployment rate rose to 4.6%, its highest level since September 2021.
Experts believe that the recent interest rate cut by the Fed may be the last for now, as they monitor the inflation situation and employment trends moving forward.
As Powell’s term expires in May 2026, potential candidates like Kevin Hassett and Kevin Warsh are being considered to take on the role of Fed Chairman.
Energy prices, particularly fuel oil and electricity, saw significant increases in November, contributing to the overall inflation rate.
Inflation was also driven by used cars and trucks, which rose by 3.6% over the year, while new vehicles only saw a 0.6% increase in prices.
Consumers may have noticed inflationary effects at the grocery store, with certain items like coffee and ground beef experiencing price hikes.
Despite the mixed data in the November inflation report, analysts are divided on whether central bankers will further reduce rates in the coming year.
The data collection period coincided with the reopening of the government in mid-November, causing fluctuations in prices due to events like “Black Friday” sales.
