Producer Price Index Remains Unchanged in November
Annual Prices Drop to 0.9% from 1.3% in September
In a positive development for the U.S. economy, inflation at the wholesale level showed signs of moderation in November, according to the Labor Department. The producer price index, which measures inflation before it reaches consumers, remained unchanged from the previous month. This defied expectations of a 0.1% monthly gain, as predicted by Refinitiv economists.
On an annual basis, prices rose only 0.9%, a significant drop from the 1.3% recorded in September. This figure also fell short of the estimated 1% annual increase. Core prices, excluding food and energy, were also unchanged for the month, lower than the projected 0.2% increase. On a 12-month basis, core prices rose by 2.2%, down from 2.4% the previous month.
Implications for Federal Reserve’s Interest Rate Policy
The consecutive reports on inflation have important implications for the Federal Reserve, which has been raising interest rates at an unprecedented pace to cool the economy. With 11 rate hikes since March 2022, the central bank has pushed the federal funds rate to its highest level since 2001.
However, with the notable decline in inflation in recent months, many economists believe that the Federal Reserve is now likely to skip an interest rate hike for the third time. Policymakers are expected to announce their decision after their final meeting this year on Wednesday. It is widely anticipated that the central bank will shift its focus from raising rates to potentially cutting them in the near future.
Consumer Price Index Rises Slightly
On Tuesday, the Labor Department reported a 0.1% increase in the consumer price index for November, slightly higher than expected. This index measures the prices paid directly by consumers and provides further indication that high inflation may be easing.
The combination of these reports will shape the Federal Reserve’s future actions and provide valuable insights into the overall health of the U.S. economy.