The latest report showed commodity prices rose less than expected in November, the latest sign that inflation gripping the economy is beginning to slow.
The consumer price index, which broadly measures goods and services, rose just 0.1% from the previous month, and rose 7.1% from a year ago, the Labor Department reported earlier today. Economists polled by Dow Jones had expected a monthly increase of 0.3% and a 12-month rate of 7.3%.
The increase from a year ago, while well above the Federal Reserve's 2% target for healthy inflation, is tied for the lowest level since November 2021.
Excluding volatile food and energy prices, the so-called core CPI rose 0.2% in the month and 6% on an annual basis, compared to estimates of 0.3% and 6.1% respectively.
Stocks jumped higher following the report, with futures tied to the Dow Jones Industrial Average up more than 800 points initially before easing slightly.
Falling energy prices help keep inflation down. The energy index declined 1.6% for the month, partly due to a 2% drop in gasoline. Food prices, however, rose 0.5% and were up 10.6% from a year ago. Even with its monthly drop, the energy index is 13.1% higher than November 2021.
Shelter costs, which make up about a third of the weighted CPI, continued to rise, rising 0.6% in the month and now up 7.1% on an annual basis.
The CPI report comes on the same day the rate-setting Federal Open Market Committee begins its two-day meeting. Markets widely expected the FOMC early Thursday to announce a 0.5 percentage point rate hike, regardless of Tuesday's CPI reading.
Inflation spiked in the spring of 2021, the result of a number-crunching factor that brought price increases to their highest levels since the days of stagflation in the early 1980s.
Among the main aggravating conditions are supply and demand imbalances caused by the pandemic, Russia's invasion of Ukraine and the impact on energy prices, and the trillions of dollars in fiscal and monetary stimulus that have left the economy still mired in supply chain problems.
Used vehicle prices, once a major contributor to the early inflationary boom, fell 2.9% for the month and are now down 3.3% from a year ago. As recently as February, the index of used cars and trucks rose more than 40% on an annual basis, thanks to higher demand as microchip shortages caused a backlog in new car production.
With the latest inflation data announced, the market also looked back at the message of Fed Chairman Jerome Powell who said recently that an important component in determining future monetary policy measures will look at service inflation excluding protection costs. The index was little changed in November but rose nearly 7.3% from a year ago.
