US consumer prices unexpectedly rose in November while underlying inflation pushed higher, offering more evidence that the Federal Reserve was unlikely to pivot to interest rate cuts early next year.

The consumer price index (CPI) edged up 0.1 per cent last month after remaining unchanged in October, the Labor Department’s Bureau of Labor Statistics said on Tuesday (Dec 12). In the 12 months through November, the CPI increased 3.1 per cent after rising 3.2 per cent in October.

Economists polled by Reuters had forecast the CPI would be unchanged on the month and gain 3.1 per cent on a year-on-year (yoy) basis. The annual increase in consumer prices has slowed from a peak of 9.1 per cent in June 2022. Inflation remains above the Fed’s 2 per cent target.

The report followed data last Friday showing job gains accelerated in November and the unemployment rate fell to 3.7 per cent from nearly a two-year high of 3.9 per cent in October. The strong employment report prompted financial markets to push back expectations of an interest rate cut to May from March, according to CME Group’s FedWatch Tool.

Officials from the US central bank were due to gather for a two-day policy meeting on Tuesday. The Fed is expected to leave rates unchanged on Wednesday, with economists confident that its policy tightening campaign is over.

“(Fed Chair Jerome) Powell will likely continue to guide that rate cuts are not yet being considered but will not substantially push back on market pricing,” said Veronica Clark, an economist at Citigroup in New York.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

The Fed has raised its policy rate by 525 basis points to the current 5.25-5.50 per cent range since March 2022.

Excluding the volatile food and energy components, the CPI increased 0.3 per cent in November after climbing 0.2 per cent in the prior month. The so-called core CPI was lifted by a rebound in prices of used cars and trucks.

High rents continued to keep underlying inflation elevated. Rental inflation could moderate considerably next year as the rental vacancy rate increased to more than a two-year high in the third quarter, and there is a large stock of apartment buildings in the pipeline.

The core CPI increased 4.0 per cent on a yoy basis in November, after advancing by the same margin in October. REUTERS