Eggs are 37.5% more expensive than a year ago

Bad news: Inflation is still rising. Good news: It’s rising the way economists expected it to.

Today’s Consumer Price Index (CPI) report was a key barometer of how well the Federal Reserve’s fight against inflation is going. While the Fed has been winning the war over the past few years thanks to interest rate hikes, inflation is digging in its heels for a final battle.

Here are the numbers to know:

• CPI rose 0.3% month-over-month in November, above the 0.2% increase seen in each of the previous four months.
• For a longer-term perspective, CPI rose 2.7% in the last 12 months, more than the 2.6% annual increase in October.
• Core CPI, which excludes volatile food and energy prices, posted a 0.3% monthly increase for the fourth month in a row, or a 3.3% increase year over year.

Although nobody wants inflation to keep climbing, this slow-but-steady increase is exactly what the Fed wanted to see ahead of its meeting next week. Prices didn’t rise so much that the central bankers need to discuss hiking interest rates, but they still rose just enough that the Fed can continue cutting interest rates.

Talk is cheap, groceries aren’t

While Wall Street celebrated today’s report and stocks rose on the announcement, this probably doesn’t feel like good news to the average American.

This report revealed that some areas where inflation is particularly painful for consumers only got worse:

• Energy prices like gas and electricity rose 0.2% month over month, after a flat 0.0% increase in October.
• The cost of food purchased for at-home consumption (aka groceries) rose 0.5% month over month—up from 0.1% in October and the largest monthly increase since January 2023.
• The price of beef rose 3.1% month over month, eggs rose 8.2%, and non-alcoholic beverages climbed 1.5%.

Or, for the visual learners, here’s how the prices of a pound of ground beef, a gallon of whole milk, and a carton of eggs has risen in the last 20 years:

One bit of good news: The shelter index, aka the cost of housing in the US, increased 0.3% in November, below the 0.4% increase in October.

The big picture…After today’s reading, the market’s pegging the chance of a 25 bps rate cut after the next Fed meeting on December 17 and 18 at about 90%. That would be the second such cut in a row, and smaller than the 50 bps cut the Fed made in September.—MR