US inflation showed signs of accelerating for the 2nd consecutive month in November 2024, with a sharp increase in consumer prices. The Consumer Price Index (CPI) rose by 2.7% year-on-year, slightly up from 2.6% in October. This marked the steepest inflation increase in the last 7 months, driven primarily by rising food prices and other sectors. Despite this, Wall Street remained optimistic, betting on another interest rate cut by the US Federal Reserve, with the central bank’s policy decision expected next week.
The CPI rose by 0.3% in November, marking the largest monthly increase since April. Prior to this, the CPI had risen by 0.2% for 4 consecutive months. Core inflation, which excludes volatile food and energy costs, increased by 3.3% compared to the same month a year ago, remaining unchanged from October. On a month-over-month basis, core CPI also rose by 0.3% for the 4th straight month.
Despite the November rise, progress in lowering inflation toward the US Federal Reserve’s target of 2% has largely stalled. Over the past four months, there has been little improvement in underlying price pressures, according to the Bureau of Labor Statistics. Economists are concerned that inflation may remain persistently high in certain sectors of the economy, particularly housing.
Housing costs were a key driver behind the overall CPI increase. Additionally, several other categories saw rising prices, including food, energy, medical care, and recreation. Goods prices, excluding food and energy, rose by 0.3% in November, the largest increase since May 2023, with household furnishings and apparel contributing to the uptick.
The global rise in goods prices is expected to lead to higher imported inflation in India, making imports costlier. High inflation in the US and other advanced economies is likely to prompt central banks to adopt tighter monetary policies, which may include raising interest rates. This, in turn, could result in increased foreign institutional investor (FII) outflows from the Indian market as investors seek higher returns in other countries with more attractive interest rates.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.
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