US inflation continued to ease in November

US consumer prices increased by 0.1% m/m in November after rising 0.4% the previous month and beat forecast for 0.3% increase, while annualized inflation fell to 7.1% in November from 7.7% in October and below 7.3% consensus.

So-called core inflation, which excludes volatile food and energy components, was up 0.2% m/m in November from 0.3% in October and identical forecast, while core inflation on twelve months through November, increased by 6% vs 6.1% consensus, down from 6.3% in October.

Decline in the cost of gasoline and used cars, was the main contributor to the smallest increase in annualized inflation since December 2021.

The US consumer prices hold in a downward trajectory after hitting the highest in 41 year at 9.1% in June, boosting optimism that strong prices pressures have peaked, suggesting that drastic measures taken by the US Federal Reserve in aggressive tightening of its monetary policy (Fed so far raised the policy rate by 375 basis points and eyes the terminal rate somewhere around 5%), started to give the first results.

On the other hand, prices of rents remain elevated, adding to the pressure from the services sector on higher wages, as the labor market is still tight, partially countering positive signals, while strong rise in borrowing cost slowed economic growth, contributing to fears that the economy is sliding into recession.

Also, economists point to still high core inflation, which suggests that the US central bank is expected to raise interest rates for some time, even though it is expected to slow the pace of hiking, as early as in December’s policy meeting which commenced today.