US inflation ticks up as market holds breath for Fed cut

US inflation ticked up to 2.7 per cent in November, a rise from 2.6 per cent in October and matching analyst expectations.

This was the highest level of inflation that the US has experienced since July, after dipping to as low as 2.4 per cent throughout September.

Inflation has not been below its 2 per cent target since February 2021.

The price of housing was the largest cause of the uptick, accounting for nearly 40 per cent of the 2.7 per cent increase in prices since last November.

Gasoline was another contributor to the spike in prices, as after it had slowly decreased throughout the last few months, jumped by 0.6 per cent throughout November, though prices are still down eight per cent from last year.

Core inflation, which tracks inflation without volatile goods like food and energy, also matched market expectations, coming in at 3.3 per cent.

The figures come ahead of an anticipated 0.25 per cent cut to interest rates from the Federal Reserve next week, though analysts said the high numbers may lead the central bank to reconsider.

“Several Fed speakers have recently indicated that they are unsatisfied by the rate of improvement in inflation and the regression in November fails to provide reassurance on that front,” said Richard Flynn, managing director at Charles Schwab UK.

“This may lead policymakers to err on the side of caution, opting for a pause in cutting interest rates to avoid bolstering pressure on prices.”

Markets currently give an 97 per cent chance of the Fed cutting rates at its meeting next Wednesday, up about 10 per cent from the probability before the numbers were released, according to data from CME Group.

However, a hold on interest rates is expected in the Fed’s meeting at the end of January, while markets give a 56 per cent chance of a cut in March.

“Policymakers will be concerned about the potential upside inflation risks stemming from incoming President Trump’s tariff plans, as well as the broader reflationary fiscal stance, whereby strong demand could further fuel price pressures,” said Michael Brown, senior research strategist at Pepperstone.