Despite the pressures on American households, inflation in the United States slowed again last month.
The government said consumer prices increased in November. It was down from a recent peak of 9%. It was the sixth time.
The consumer price index was little changed on a month-to- month basis in November.
The Federal Reserve plans to keep raising interest rates even though inflation has fallen. The Fed is set to raise its benchmark rate for a seventh time this year, a move that will raise borrowing costs for consumers and businesses. The Fed is likely to cause a recession next year if it continues to tighten credit, according to economists.
Less expensive gasoline, electricity and used cars were some of the things that slowed inflation in November.
Several trends have begun to reduce price pressures, though they won't likely be enough to bring overall inflation back down to levels that Americans were used to.
The national average for a gallon of gas dropped from $5 in June to $3.26 as of Monday. The cost of imported goods and parts has been reduced by many supply chains. Lower construction and food costs can be attributed to the falling prices of lumber, copper, wheat and other materials.
Even though inflation is far above the central bank's annual 2% target, the figures are a sign of improvement.
In order to better understand the likely path of inflation, the Fed Chair has said he is tracking price trends in three different categories.
In a speech two weeks ago in Washington, Powell said that there had been some progress in easing inflation in goods and housing, but not in most services. Since the summer, physical goods have become less expensive.
The prices of used cars have fallen for most of the year.
Almost a third of the consumer price index is spent on housing. Real-time measures of apartment rents and home prices are starting to go down after having gone up at the height of the swine flu. The declines in government data will help reduce inflation, according to Powell.
Services costs are likely to stay high. Part of that is due to the fact that wages are going up a lot. Hotels and restaurants are labor intensive. With average wages growing at a brisk 5%-6% a year, price pressures continue to build in that sector of the economy.
Services businesses tend to pass on some of their higher labor costs to their customers in the form of higher prices. Companies are able to raise prices because of higher pay.
Powell said that wages need to go up at a level that is consistent with inflation.
The Fed is expected to raise its short-term rate by half a point on Wednesday. It would leave its benchmark rate between 3% and 4%, its highest level in fifteen years.
If inflation stays relatively subdued, the Fed is expected to further slow its rate hikes next year.
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