Summary
Two important inflation reports were released last week. Both indicated that overall pricing pressures remain well below the peak rates in 2022. But both also confirmed that inflation remains above the Fed?s target of 2.0%, and that it may take more time to get to that level. Let?s first take a deeper dive into the Consumer Price Index. There were some positive results here, even though the annualized headline number ticked higher from the previous month (2.7% versus 2.6%). According to the latest report, the core inflation rate (ex-food and energy) was steady at 3.3%. That good news was accompanied by monthly pricing slowdowns in important categories such as Transportation Services and Shelter, where pricing pressures have been slower to ease. If these two categories continue to slow, the overall rate should turn lower as well. The other inflation report was the Producer Price Index, which measures pricing trends farther up the supply chain, at the manufacturing level. Here, we saw mixed trends. The PPI final demand annual rate through November was 3.0%, compared to 2.4% in October and 1.9% in September. But the PPI intermediate demand rates for both processed and unprocessed goods were outright negative. We expect pricing pressures to continue to ease as the housing market cools, supplies of new vehicles are replenished, and the price of oil s
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