The latest data reveals a welcomed decline in US inflation rates. According to the Bureau of Labor Statistics (BLS), the Consumer Price Index (CPI) fell to 3.1% in November, down from 3.2% in October and 3.7% in September.
This marks the second drop in inflation over the last three months, signaling that the Federal Reserve’s interest rate hikes may be having their intended effect of cooling an overheated economy.
For over a year, the Fed has battled soaring inflation through aggressive policy tightening. They have raised interest rates significantly in an effort to slow demand and restrain prices. With inflation proving stubbornly high, the Fed is hoping to see consistent declines as proof their strategy is working.
November’s CPI data provides some relief
The drop to 3.1% inflation will come as a relief to the Fed in assessing the impact of their rate hikes. While still above their 2% target, the cooling since September suggests we may be past peak inflation and that the Fed’s persistence in raising rates is helping wrestle rising prices under control.
Ongoing trends will help determine the next policy moves. If inflation continues trending down, the Fed may moderate future rate hikes. But they will want clear evidence that inflationary pressures are abating before declaring victory. For now, November’s data provides some reassurance that their tightening campaign is bearing fruit.