Wednesday’s CPI report is expected to show inflation progress has hit a wall | Real Time Headlines

A key economic report on Wednesday is expected to show progress in lowering inflation has stalled, but not so much that the Federal Reserve will not cut interest rates next week.

The Consumer Price Index, a broad measure of the cost of goods and services across the U.S. economy, is expected to mark a 2.7% 12-month inflation rate in November. An increase of 0.1 percentage points from the previous monthaccording to the Dow Jones consensus.

Excluding food and energy, so-called core inflation is expected to be 3.3%, unchanged from October. Both indicators are expected to grow 0.3% each month.

With the Federal Reserve setting an annual inflation target of 2%, the report will provide more evidence that the high cost of living remains a reality for American families.

“Looking at these indicators, there is nothing to suggest that the inflation dragon has been wiped out,” said Dan North, senior economist at Allianz Trading Americas. “Inflation remains and is not showing any convincing signs of growth.” Signs of moving towards 2%.”

In addition to Wednesday’s consumer price data, Thursday the U.S. Bureau of Labor Statistics will also release producer price indexa measure of wholesale prices, is expected to rise 0.2% monthly.

To be sure, inflation has fallen significantly from the CPI cycle peak of about 9% in June 2022. Cumulative impact of price increases This is a burden for consumers, especially those with lower wages. Core CPI has been trending higher since July after a series of steady declines.

Still, traders in the futures market still have high hopes for policymakers. The benchmark interest rate for short-term borrowing will be lowered again When the Federal Open Market Committee concluded its meeting on December 18, the rate cut was 25 percentage points. CME Group’s Fed Watch measure.

“When the market is as locked up as it is today, the Fed doesn’t want to create a big surprise,” North said. “So unless there’s a spike that we don’t foresee, I’m pretty sure the Fed is going to be on lockdown.”

Goldman Sachs said November’s rise in CPI could come from several key areas.

Car prices are expected to rise 2% per month, while airline ticket prices are expected to rise 1%, the company’s economists said in a report. Additionally, Goldman Sachs estimates that troublesome growth in auto insurance is likely to continue, rising 0.5% in November after rising 14% last year.

While the company expects “further deflation next year” due to easing in the auto and home rental categories and a softening labor market, it is also worried about the president-elect Donald Trump’s tariff plan Inflation is likely to remain high in 2025.

Goldman Sachs expects core CPI inflation to slow next year, but only to 2.7%, while the Federal Reserve’s target inflation gauge, the personal consumption expenditures price index, will rise to 2.4% from the recent level of 2.8%.

With inflation expected to be well above 2% and macroeconomic growth still close to 3%, this would not normally be an environment for the Fed to cut interest rates. The Fed would use higher interest rates to dampen demand, which in theory would force companies to lower prices.

Markets expect the January meeting to be skipped, followed by another possible rate cut in March. From then on, market pricing is only available for one or at most two cuts through the remainder of 2025.

“To me, 2% doesn’t mean just hitting 2% and continuing to bounce back. It means hitting 2% consistently for the foreseeable future, and that’s not obvious in any of these reports,” North said. “You really don’t want to be editing in that environment.”