Despite higher costs for housing pushing US inflation a bit higher in October 2024, hopes linger for another rate cut in December when the FOMC – the Federal Open Market Committee empowered to take rate cut decisions – meets to review the policy rates in the world’s largest economy.
If the expectations prove to be correct, it will be the third rate cut in 4 months in the US that held interest rates at a high and did not venture into any cut following the rise in inflation following injection of cash after the pandemic.
US CPI inflation in October
Reports emanating from the Bureau of Labor Statistics on November 13 showed that inflation was a bit on the higher side. It showed that the US CPI (consumer price index) inched up 2.6% compared to a year ago. It was sequentially up against September 2024 too, when it stood at 2.4%. It also recorded the first time in 7 months when this vital metric recorded a rise. Reports also said that cost of shelter was more than 50% of the overall monthly advance. The scourge of inflation was believed to be one of the factors that cost the Democrats the White House in the election on November 5, when angry voters provided a thumping victory to Republican Donald Trump.
Will the US Fed cut rates in 2025?
According to analysts, US Fed could opt for a 25-basis point cut in December. However, the chances of interest rate cuts in 2025 have been pared down from three-four to two. It must be noted Donald Trump, himself career businessman, believes in low interest rates and low taxes, which could have a bearing on the approach to taking crucial decisions in the world’s largest economy.
What pushed up US CPI?
According to data, the inflation in core items fell to 0.1% m/m (month on month) from 0.2% m/m. Automobile prices rose 2.7% m/m. Shelter costs rose 0.4% m/m compared to 0.2% m/m earlier but while cost of transport services dropped 0.4% m/m from 1.4% m/m prev. Car insurance costs was instrumental in pushing this rate down.
Energy prices remained flat, thanks to lower crude prices. However, electricity costs rose at 1.2% m/m. Food prices too went up at 0.2% m/m.
The US Fed has cut key interest rates by 50 basis points in September after more than 4 years and followed it up with 25-basis-point reduction in November. Biz News Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
