Skip to Content
December 12, 2018 Blog 2 min read
With no change in consumer prices in November, the CPI edged down to 2.2% for the year.

12-12 CPI Chart

The consumer price index (CPI) was unchanged in November, in line with expectations. Excluding the usually more volatile food and energy prices, core CPI increased by 0.2% for the month, also consistent with economists’ forecasts.

Those soft November results allowed the year-over-year headline CPI to edge lower to 2.2% -- its lowest result since February. Core inflation edged up to 2.2% for the year, but has remained largely anchored around that level for several months.

Of particular note was a 2.2% decline in energy prices for the month, as supply was more than ample and prices at the pump declined by more than 4%.

Service-related prices continue to rise at an accelerated clip, rising a moderate 0.2% for the month, but still up a solid 2.9% over the past year.

Supported by a strong economy and an active Fed, the strength of the U.S. Dollar over the past year has contributed to keeping price pressures in check. Further strengthening of the dollar could help to keep a lid on import prices and inflation, but indications that the Fed may slow their planned pace of rate increase raise some doubts about the degree of upside in the greenback. Tariffs, of course, are a wild card that could raise prices on select imports by an amount that more than offsets any benefit from currency appreciation.

Labor market conditions remain tight with unemployment firm at 3.7% and wage growth topping 3% on a year-over-year basis in November. Stronger wage growth still appears likely, and that should keep some upward pressure on inflation so long as those tight labor markets persist as expected.

Although the probability of a December Fed rate hike have slipped in the past week, the likelihood of one more increase to close out the year remains high. The real question is what lies ahead in 2019, and all eyes will be on the Fed’s policy statement and Chairman Powell’s comments at the associated press conference next week.

The bottom line is that inflation appears to have stabilized at least for now, as the Fed’s previous tightening has seemingly had the desired effect. With the economy now slowing moderately, the challenge will be for the Fed to thread the needle between taking sufficient action to keep a lid on inflation while not moving so aggressively to choke of growth. To that end, it would appear that central bank policy decisions in the coming months may prove critical.

Media Mentions

Our experts were recently quoted on this topic in the following publication:

Past performance does not guarantee future results. All investments include risk and have the potential for loss as well as gain.

Data sources for peer group comparisons, returns, and standard statistical data are provided by the sources referenced and are based on data obtained from recognized statistical services or other sources believed to be reliable. However, some or all information has not been verified prior to the analysis, and we do not make any representations as to its accuracy or completeness. Any analysis non-factual in nature constitutes only current opinions, which are subject to change. Benchmarks or indices are included for information purposes only to reflect the current market environment; no index is a directly tradable investment. There may be instances when consultant opinions regarding any fundamental or quantitative analysis may not agree.

Plante Moran Financial Advisors (PMFA) publishes this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult a representative from PMFA for investment advice regarding your own situation.