Inflation is really chilling out

Like you at work right now, inflation is mailing it in to end the year.

The Bureau of Labor Statistics reported yesterday that inflation continued to slow its roll in November, as US consumer prices rose just 0.1% from the previous month. Compared to a year ago, prices were up 7.1% in November, which is actually the fifth consecutive month of declining annual inflation.

The inflation figures were lower than economists predicted, furthering the relatively cheery mood ahead of today’s Federal Reserve interest rate announcement. Plateauing consumer prices are a signal to the Fed that it can start to chill with historically massive rate hikes that have been slowing the economy. And it plans to: Chair Jerome Powell is expected to increase interest rates by 50 basis points today, lower than the 75 bps increases announced at the previous four meetings.

What got cheaper (or more expensive)?

As always, inflation varied for different products and services.

• Bad news if you’re a salad-guzzling Red Wings fan: Produce and sports tickets were among the goods with the highest monthly price increases.
• Meanwhile, buying health insurance and heating your home with natural gas got cheaper—though energy costs overall remain eye-poppingly expensive.

Prices for physical goods continued to decline (used cars, the poster child of Covid-era inflation, are now more than 3% cheaper than they were a year ago). Sure seems like the age of pandemic-related shortages is finally over.

But prices for rents continued to creep up, proving that inflation is still a long way from coming back to normal levels. The good news? Private sector data suggests that housing prices have already started to decline...it just hasn’t shown up in the government’s reports yet.

Big picture: Inflation is like a flight—it gets up to cruising altitude quickly, but the “final descent” seems to take forever. A few days ago, Treasury Secretary Janet Yellen predicted “much lower” inflation…but not until the end of next year.—SK