November 2018 Consumer Price Index

Aggregate prices were unchanged for Americans in November 2018 according to the Bureau of Labor Statistics.  Their Consumer Price Index (CPI) held steady after rising 0.3 percent in October.  Year-over-year, this popular measure of inflation increased 2.2 percent, decelerating from 2.5 percent.  However, removing food and energy (because they tend to be volatile), core-inflation increased 0.2 percent in the period and is also up 2.2 percent from a year ago.

Rising costs associated with services led the core tally higher. Recreation services jumped 0.5 percent.  Medical care services rose 0.4 percent and are up 2.4 percent in the past twelve months.  Shelter services increased 0.3 percent, led by an uptick of 0.4 percent for rents.  However, expenses related to education and communications were lower as prices for telephone services plunged 1.6 percent.

While services led the uptick, goods participated in the increase as well. Goods less food and energy increased 0.2 percent.  Used car and truck prices jumped 2.4 percent after a surge of 2.6 percent in October; providing some relief, new cars were virtually unchanged.  Also adding to the total were medical care products as they reversed direction after four monthly declines, increasing 0.4 percent.

So here we are on the first day of the Federal Reserve’s last Federal Open Market Committee meeting of the year.  Several economic data points have been softening, but core-CPI is a little higher than their 2.0 percent target.  Markets have been volatile for most of this quarter, the yield curve (the interest rate differential between various bond maturities) is flattening, and President Trump is tweeting about monetary policy.  As of this writing, the odds of an interest rate increase announcement for the federal funds rate tomorrow is 68 percent according to futures contracts.  In other words, there remains a not insignificant chance of a central bank pause.  That could create violent reactions from markets around the globe, but the direction of the move is anybody’s guess.