The U.S. Consumer Price Index (CPI) numbers for November that are the worst in seven months may still not deter the Federal Reserve from easing interest rates further, according to a Reuters report. However, the likely impact of further price increase on the economy from the policy shift towards huge tariff barriers against more countries that President-elect Donald Trump has indicated is worrisome for the market.
The consumer price index rose 0.3% last month, the largest gain since April after advancing 0.2% for four straight months, the Labor Department's Bureau of Labor Statistics said.
The report said the Fed Reserve’s priority of stimulating the labor market by easing interest rates still holds. The market has been waiting for the third consecutive rate cut next week to energize the economy.
Wednesday’s Bureau of Labor Statistics report showed that the central bank’s push for a 2 percent inflation target has somewhat stalled with key measures not showing improvement over the past four months.
However, the lowest rise in more than three years in rent cost, a major component of inflation measures, in the latest report has been notable. The Reuters report also takes note of the moderating increase in motor vehicle insurance. The slower pace of increase in these two important measures offset the increase in service inflation.
"Some Fed officials will likely take solace in the improvement in services and housing inflation," the Reuters report quoted Scott Anderson, chief U.S. economist at BMO Capital Markets, as saying. "With that said, the Fed will need to see more improvement on the inflation front in the months ahead, if its plan for a steady pace of additional rate cuts next year is to be fulfilled."