Announced this morning, the Consumer Price Index increased 0.1% in November, less than expected and lower than the previous month. The headline number grew 7.1% on an annual basis. Monthly prices for Shelter, up 0.6%, and Food, up 0.5%, were strong, while monthly prices for Used Cars and Trucks, down -2.9% which is the fifth month in a row of declines, and Utility Gas Service, down -3.5%, were weak. The core rate, which excludes prices for food and energy, increased 0.2% in November, also lower than as expected and lower than the previous month. The core rate increased 6.0% on an annual basis.
Overall, a decent report on inflation as both the headline and core rates grew less than the previous month. The annual figures were also lower but remain at elevated levels. While some measures are beginning to wane, inflationary pressures remain in the system, especially considering the hotter than expected report on producer prices last week. The dynamic of elevated prices for services and declining prices for commodities remains, as noted by prices for used cars and trucks declining for five months in a row. While the Federal Reserve is likely to slow the pace of rate increases in the coming weeks, it may take some time with tighter policy to ensure inflation continues to trend lower to their desired goal. How the labor market and the economy hold up amidst this process will be key for the markets in the months ahead.
In all, the 10-year US treasury yield ticks markedly lower following the report and equity futures jump higher as we head into the market open.
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