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  The Consumer Price Index (CPI) Rose 0.1% in November
Posted Under: CPI • Data Watch • Government • Inflation • Fed Reserve • Interest Rates
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Implications:  Consumer prices rose 0.1% in November, falling well short of the consensus expected 0.3% and pushing the year-ago comparison down to 7.1%.  Some analysts will argue the smaller than expected monthly rise means that the Fed’s job in fighting inflation is over.  We say pump the brakes; no matter which way you cut it, inflation remains well above the Federal Reserve’s target of 2.0%.  The smaller than expected monthly rise was held down by a number of categories that declined for the month, some of which have been persistently volatile since the 2020 inflation scare began.  Energy prices declined 1.6% in November, driven by lower prices for gasoline (-2.0%) and natural gas (-3.5%).  Stripping out energy and its other volatile counterpart, food prices, “core” prices rose 0.2% versus a consensus expected rise of 0.3%.   Housing rents were the main upward driver within the core, rising 0.7% for the month.  We expect housing rents to remain consistently high in 2023 because they still have a long way to go to catch up to home prices, which skyrocketed during COVID.  Some analysts point to “real-time” rental indexes based on what new tenants are paying, which have softened in the last couple months, as foreshadowing a drop in CPI rents.  But this process will take time before they bleed into the CPI, which covers all tenants and homeowners, not just new tenants.  Meanwhile, there were a handful of CPI categories that declined for the month, including prices for airline fares (-3.0%), used vehicles (-2.9%), and medical care services (-0.7%).  While prices for vehicles and airline fare have been very volatile since COVID began, we expect the category for medical care services to be a persistent drag on inflation for the next year due to the way the government tracks health care prices and makes adjustments once a year (in October).  While today’s report may be a welcome sign to the markets – make no mistake – the Fed still has a very long way to go before it can say the inflation scare is over.  Expect a 50 basis point rate hike at the Fed’s meeting tomorrow, along with guidance that the Fed is prepared to continue raising rates in 2023.

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Posted on Tuesday, December 13, 2022 @ 4:16 PM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
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