Fresh inflation data set to arrive as Fed weighs rate cuts

(WASHINGTON) — Fresh inflation data set for release on Wednesday will provide an update on prices ahead of the holidays and help determine the outcome of an interest rate decision at the Federal Reserve slated for next week.

A monthslong slowdown of inflation came to an end when price increases accelerated in October, the most recent month for which data is available. The hot reading reversed some previous progress in lowering inflation and left price increases above the Fed’s target rate.

Economists expect consumer prices to have climbed 2.7% in November, which would amount to a slight uptick in price increases and mark two consecutive months of rising inflation.

The inflation gauge makes up the last piece of significant economic data before the Fed announces its next interest rate decision on Dec. 18. A finding of accelerated price hikes may give the Fed pause as it weighs interest rate cuts.

Inflation has slowed dramatically from a peak of more than 9% in June 2022, but price increases remain slightly above the target rate of 2%.

In recent months, the Fed has cut its benchmark rate three quarters of a percentage point, dialing back its yearslong fight against inflation and delivering relief for borrowers saddled with high costs.

The Fed is expected to cut interest rates by another quarter of a percentage point at its meeting next week, according to the CME FedWatch Tool, a measure of market sentiment.

Over time, rate cuts ease the burden on borrowers for everything from home mortgages to credit cards to cars, making it cheaper to get a loan or refinance one. The cuts also boost company valuations, potentially helping fuel returns for stockholders.

In theory, the policy eases access to funds, stimulates economic activity and boosts demand. But the promise of bolstered consumer strength risks increased prices.

Speaking at a press conference in Washington, D.C., on Thursday, Fed Chair Jerome Powell voiced optimism about the prospects for achieving a “soft landing,” in which the U.S. averts a recession while inflation returns to normal.

“We continue to be confident that with an appropriate recalibration of our policy stance, strength in the economy and labor market can be maintained with inflation moving sustainably down to 2%,” Powell said.

The trajectory of inflation could shift in the coming months. Some economists expect President-elect Donald Trump’s proposals of heightened tariffs and the mass deportation of undocumented immigrants to raise consumer prices.

When asked about the Fed’s potential response to Trump’s policies, Powell said the central bank would make its rate decisions based on how any policy changes impact the economy.

“In the near term, the election will have no effects on our policy decisions,” Powell said. “We don’t know what the timing and substance of any policy changes will be. We therefore don’t know what the effects on the economy will be.”

“We don’t guess, we don’t speculate and we don’t assume,” Powell added.