Moderating US inflation pressures extended in November

December 12, 2023 | Claire Fan


  • US headline inflation ticked down to 3.1% in November from 3.2% in October. Food and energy inflation both eased while core ex-food and energy inflation was little changed at 4%. 
  • Lower gasoline prices in November pushed energy inflation down further to 5.4% below year-ago levels. Food price growth also slowed again, to a 2.9% year-over-year rate that was the lowest reading in over two years. Persistent slowing in global commodity prices over the fall should see those trends persist into the end of the year. 
  • Excluding food and energy products, core price growth held at 4.0% year-over-year in November on a 0.3% month-over-month increase from October. All of the yearly increase in core inflation is now accounted for by services components – CPI for core goods dropped to 0% year-over-year in November. 
  • Among services components, shelter, including rent and owner’s equivalent of rent (OER) again accounted for a larger share – over 60% of that 0.3% monthly increase in core prices. Moving forward, we continue to expect moderations in rent inflation, as slowing in market rent measures feeds through to leases with a lag.
  • Other services components including physicians’ services and airline fares were seeing price deflation in November, with declines of 0.7% and 12.1% from year ago levels, respectively.
  • There are pockets of the consumer basket where inflation is still high. The Fed's preferred 'supercore' (core services ex-rent) measure picked up to 0.4% month over month in November, leaving the annualized 3-month rate of increase higher also at 5.8%. 
  • Still, the breadth of inflation pressures continued to show improvement - the share of the consumer basket (excluding the shelter component) seeing abnormally high rate of price growth (+3% annualized) over the last three months slipped to 32% in November, down from ~50% over the summer and is now in line with pre-pandemic normal levels. 
  • Bottom line: The November CPI data largely extended trends of normalizing inflation pressures as seen in October’s CPI as well as core PCE data. It should have little impact on the Fed’s decision tomorrow, where a no-change in the fed funds target range is widely expected to be delivered. The Fed will retain the option to push interest rates higher – economic growth has remained resilient and Chair Powell has actively pushed back against rhetoric around rate cuts in 2024. But labour market conditions have looked softer on balance, and slower wage growth is adding to evidence that inflation pressures are easing. With inflation and labour markets (both ends of the Fed’s dual mandate) moving towards target levels, we continue to expect the Fed to stay on hold, until pivoting to gradual cuts in the second quarter of 2024.

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