Consumer prices pick up in bumpy path down for inflation

US consumer prices picked up in November, reinforcing the Federal Reserve’s resolve to keep interest rates elevated in the near term.

The so-called core consumer price index, which excludes food and energy costs, increased 0.3% following a 0.2% advance in October, according to government figures. From a year ago, it advanced 4% for a second month.

Economists favor the core metric as a better gauge of the trend in inflation than the overall CPI. That measure ticked up slightly after being little changed in October. From a year ago, it was up 3.1%.

Tuesday’s data underscore the choppy nature of getting inflation back in line. While price pressures have largely retreated from multi-decade highs, a still-strong labor market continues to power consumer spending and the broader economy.

Fed officials begin a two-day meeting Tuesday that is expected to culminate with them holding interest rates steady again. Chair Jerome Powell will likely reiterate he and his colleagues want to see a more sustainable pullback in price growth before easing policy.

Treasuries erased gains, stock futures fell and the dollar pared losses after the release. Traders scaled back bets on an interest-rate cut in March.

The Bureau of Labor Statistics figures reflected increases in rents, medical care and motor-vehicle insurance. Used-car prices rose for the first time since May. On the other hand, apparel and furniture costs declined.

Shelter prices, which make up about a third of the overall CPI index, rose 0.4%, offsetting a decline in gasoline prices. Economists see a sustained moderation in the shelter category as key to bringing core inflation down to the Fed’s target.

Excluding housing and energy, services prices climbed 0.4% from October, picking up from the prior month, according to Bloomberg calculations. While Powell and his colleagues have stressed the importance of looking at such a metric when assessing the nation’s inflation trajectory, they compute it based on a separate index.

Unlike services, a sustained decline in the price of goods has been providing some relief to consumers in recent months. So-called core goods prices, which exclude food and energy commodities, fell for a sixth month, matching the longest streak since 2003.

The Fed is looking for softer labor-market conditions to rein in demand across the economy, especially after last week’s strong jobs report. A separate report Tuesday showed real earnings advanced 0.8% in November from a year earlier, extending a months-long streak in which wage growth has outpaced inflation.

Consumers are growing more optimistic on the trajectory inflation is headed. Separate reports this month showed near-term inflation expectations are now at the lowest levels since early 2021, aided by lower gas prices.

Looking ahead, the key question for policymakers isn’t so much when they’ll cut interest rates, but why. In a Bloomberg survey of economists this month, nearly three-quarters said cuts would be in response to cooling inflation, while 28% said they’d be due to the start of a recession.