Inflation Slows

December 18, 2023

Two major indices indicate that inflation is slowing.  The Consumer Price Index (CPI) increased 0.1% in November and is 3.1% higher year-over-year.  The latest report from the Department of Labor shows a steady decline in CPI since June 2022 when the annual year-over-year percent change peaked at 9% for all items.  In September 2022, the peak CPI less food and energy hit 6.6%.  Current economic conditions are being labeled as “disinflation,” a temporary slowing of the pace of price inflation.

The Producer Price Index (PPI) was flat month-over-month in November. Core PPI increased 2% year-over-year, the lowest gain since January 2021. Bloomberg reports that the data confirms that inflation is trending in the direction of the Federal Reserve’s 2% target.

The report from the Labor Department last week, which also showed services prices flat for a second straight month, bolstered optimism that overall inflation would continue to subside and allow the Federal Reserve to start cutting interest rates next year.

“The ongoing disinflation has been a welcomed trend, especially given that is has occurred while the job market has remained fairly strong.  Looking ahead, while any one month can bounce any which way, most forecasters expect the broad, disinflationary trend to persist.”

Council of Economic Advisors