U.S. inflation slows again, CPI shows, as Fed prepares to raise interest rates

U.S. inflation slows again, CPI shows, as Fed prepares to raise interest rates

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The numbers: The cost of living rose a scant 0.1% in November, the latest in a string of mild readings that suggest the worst U.S. inflation in 40 years is receding.

Economists polled by The Wall Street Journal had forecast a 0.3% increase in the consumer price index.

The annual rate of inflation fell to 7.1 % from 7.7% in the prior month, marking the lowest level since the end of 2021. Inflation peaked at 9.1% in June.

The modest rise in inflation in November gave a big lift to stock prices in premarket trades. Wall Street hopes waning inflation will let the Federal Reserve scale back how much it raises U.S. interest rates.

The Fed on Wednesday is widely expected to raise a key short-term interest rate by 1/2-point, but it would be a step down from the 75-basis point hikes in the prior four meetings stretching back to June.

The so-called core rate of inflation, which omits food and energy, rose 0.2%. That’s the smallest gain since August 2021. Wall Street had forecast a 0.3% increase.

The advance in the core rate over the past year dropped to 6% from 6.3%. The Fed views the core rate as a more accurate predictor of future inflation trends.

Big picture: Prices aren’t rising as fast now as they were earlier in the year, but economists and Fed officials say inflation probably won’t return to pre-covid levels of 2% until 2024 or even 2025.

The Fed aims to bring down inflation by raising interest rates high enough to reduce the demand for labor, goods and services.

The big question is whether the Fed can do so without triggering a recession. Most economists are skeptical — they predict a downturn is likely in 2023.

Market reaction: The Dow Jones Industrial Average

and S&P 500

were set to open sharply higher in premarket trades. The yield on the 10-year Treasury note

fell to 3.55%.

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