Inflation increased by 7.1% year on year compared to last year

Inflation slowed again last month, more than expected, as the Federal Reserve hiked interest rates at its fastest rate in decades.

The consumer price index (CPI) in November showed a 7.1% increase over last year and an increase of 0.1% over the month, the Bureau of Labor Statistics said Tuesday. Economists had expected prices to rise at a 7.3% annual clip and 0.3% month-on-month, according to data from Bloomberg.

On a “core” basis, which removes volatile food and energy components from the report, prices rose 6.0% year-on-year and 0.2% in November. Consensus estimates called for a 6.1% annual increase and a 0.3% monthly increase in the core CPI value.

U.S. stock futures soared after the release. Contracts on the S&P 500 rose 2.8%, while futures on the Dow Jones Industrial Average rose more than 700 points. Nasdaq futures rose 3.8%.

While the November data showed inflationary pressures easing, the cost of essential items and housing remains stubbornly high for US consumers.

The Federal Reserve monitors “core inflation” more closely, which offers policymakers a more nuanced view of inputs such as housing. The overall CPI figure, on the other hand, has moved largely along with erratic energy prices this year.

While falling oil prices brought headline inflation down last month, the CPI shelter category – which accounts for 30% of total CPI and 40% of core value – was the main contributor to the monthly increase across all items, offsetting the declines in energy indices. The cost of lodging rose 7.1% over the past year, nearly half of the overall increase in core CPI, according to the Bureau of Labor Statistics.

“Housing costs have a unique, symbiotic relationship with inflation,” Bright MLS chief economist Lisa Sturtevant said in a note.

In a speech last month at the Brooking Institution in Washington DC, Federal Reserve Chairman Jerome Powell emphasized that inflation in the housing market has been rising rapidly, while inflation in other core services has “fluctuated but showed no clear trend”.

Meanwhile, food prices rose by 0.5%, little changed from October’s 0.6% increase. Four of the six major food groups in supermarkets were up during the month.

Tuesday’s major inflation report — arguably the last major economic release of 2022 — also comes as the Federal Reserve begins its final meeting of the year. On Wednesday, members of the policy-making Federal Open Market Committee (FOMC) are poised to raise interest rates by 50 basis points, a slowdown from the 0.75% rises seen in the past four meetings.

Lighter-than-expected inflation data is unlikely to deter officials from raising their benchmark policy rate by the expected 0.50% at the end of their meeting or proceeding with another estimated 75 basis points of increases in the new year.

(This post is breaking. Check back later for updates.)

WASHINGTON, DC - NOVEMBER 30: Jerome Powell, Chairman of the US Federal Reserve, speaks at the Brookings Institution, November 30, 2022 in Washington, DC.  Powell discussed the economic outlook, inflation and the job market.  (Photo by Drew Angerer/Getty Images)

WASHINGTON, DC – NOVEMBER 30: US Federal Reserve Chairman Jerome Powell speaks at the Brookings Institution. (Photo by Drew Angerer/Getty Images)

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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