- Headline price growth ticked up to 2.1% year-over-year in November
- Core price growth held steady at 2.3%
- Inflation trends leaving the Fed with room to maneuver
Underlying US inflation trends continue to look firmly locked in around the Fed’s 2% objective. Headline price growth ticked up to 2.1% from 1.8% in October, largely because the drag from energy prices eased on a year-over-year basis. Food price growth was right on 2%. Core (ex-food & energy) price growth was unchanged at 2.3%, still in the tight 2.0% and 2.4% range that has held since March 2018. The Fed’s preferred core PCE inflation measure has remained a touch softer, but still has been stable at slightly below 2%.
Of course boring, around-target, inflation trends are exactly the kind that Federal Reserve policymakers like. There is little evidence that underlying inflation pressures are at risk of moving unsustainably higher or lower any time soon. That left the Fed with lots of flexibility to respond pre-emptively to growing fears about the global growth backdrop with 25 basis cuts in each of the last three policy decisions. The central bank is now widely expected to pause and take a wait-and-see approach going forward before making any future changes, including at the next interest rate decision this afternoon. We expect ultimately that growth in the US economy will remain slower, but relatively resilient. With inflation trends still anchored around target, and interest rates already low, we look for the Fed to now remain on the sidelines through next year.
