Summary: November US CPI up, more than expected; rise in core rate “broad-based”; “most notable increases” in services sector; transportation, shelter costs up, used vehicles down.
The annual rate of US inflation as measured by changes in the consumer price index (CPI) halved from nearly 3% in the period from July 2018 to February 2019. It then fluctuated in a range from 1.5% to 2.0% through 2019 before rising above 2.0% in the final months of that year. Substantially lower rates were reported from March to May but subsequent reports indicated consumer inflation has largely returned to pre-pandemic levels.
The latest CPI figures released by the Bureau of Labor Statistics indicated seasonally-adjusted consumer prices rose by 0.2% on average in November. The result was more than the 0.1% increase which had been generally expected and above October’s flat result. On a 12-month basis, the inflation rate remained unchanged at 1.2%.
“Headline” inflation is known to be volatile and so references are often made to “core” inflation for analytical purposes. Core inflation, a measure of inflation which strips out the volatile food and energy components of the index, also increased by 0.2% on a seasonally-adjusted basis for the month. The result was greater than the 0.1% rise which had been expected and higher than October’s comparable figure of 0.0%. The seasonally adjusted annual rate reverted back to 1.7% after slipping to 1.6% in October.
“The rise in core was broad-based, with the most notable increases being seen in the services sector, including airline fares and lodging,” said NAB economist Tapas Strickland.
US Treasury bond yields fell on the day. By the close of business, the US 2-year yield had slipped 1bp to 0.14%, the 10-year yield had lost 2bps to 0.91% while the 30-year yield finished 4bps lower at 1.64%.
In terms of US Fed policy, expectations of any change in the federal funds range over the next 12 months remained fairly soft. January futures contracts implied an effective federal funds rate of 0.085%, just above the spot rate of 0.08%.