Inflation Moderates to 7.1% Year-over-Year Increase in November 2022
Recently, the U.S. Bureau of Labor Statistics reported that the consumer price index eased to a 7.1% year-over-year increase in November 2022, down from 7.7% in October. This means that prices of a broad selection of goods have risen, but less than expected. November marks the fifth consecutive month that inflation slowed—another good sign.
Indications of improving inflation could mean fewer and slower rate hikes by the Federal Reserve (Fed) in the future. Inflation improvement could also affect mortgage rates, which have dropped significantly since October’s promising inflation report.
The shelter index was the largest contributor to the year-over-year increase. The 0.6% shelter increase offset the decreases in energy indexes. The energy index decreased by 1.6% as gasoline, natural gas and electricity indexes declined. Declining indexes included used cars and trucks, medical care and airline fares. Furthermore, many supply chains are no longer clogged, thus reducing the prices of goods.
“Although the long-awaited moderation in goods categories is finally underway, the underlying pace of inflation still looks inconsistent with the Fed’s target.”
- Tiffany Wilding, an economist at PIMCO
While inflation and high interest rates continue to challenge Americans, good progress is being made elsewhere. The labor market remains more resilient than expected, as the unemployment rate is still low at 3.7%. Keep in mind that figure doesn’t capture the whole job market, such as those who are underemployed or not looking for work.
What’s Next?
This week, the Fed raised its benchmark interest rate a half-point to a range of 4.25% to 4.5%. This is the highest level in 15 years, signaling that the battle against inflation is not over despite recent promising signs. Additionally, officials indicated they expect to keep rates higher through next year—with no reductions until 2024.
Only time will tell if year-over-year inflation increases are truly on a sustained downward path. Individuals should continue to monitor the ever-changing economy and associated inflation trends, adjusting their financial habits accordingly.
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