The fight against inflation continues after November’s CPI report: CEI analysis

Inflation inched slightly higher in November compared to October, moving from 2.6 percent to 2.7 percent respectively. CEI senior economist Ryan Young says stubborn inflation numbers should give the Federal Reserve motivation to continue taking the fight against high prices seriously.

“Inflation accelerated a bit during November, with its annual pace moving from 2.6 to 2.7 percent. A return to 9 percent inflation is not in the cards, barring another pandemic-scale spending binge. Still, inflation just won’t go back down to its 2 percent target.

“The Federal Reserve will still likely cut interest rates at its meeting next week. But CPI’s stubbornness, combined with the likelihood of new tariffs coming next year, should at least give Fed officials pause. Solid growth plus lower unemployment means that the Fed can afford to continue taking inflation seriously without risking recession.

“The Fed achieved the soft landing a while ago. Now its job is to build credibility with the public that it will continue to take inflation seriously under a new administration that will engage in heavy deficit spending. 

“Right now, markets believe that the Fed, White House, Congress will all go into stimulus mode at the first sign of economic trouble. That would mean more inflation. Changing those expectations is the Fed’s most important job right now. We’ll find out next week how seriously it is taking that responsibility.”