US CPI slows in November as expected

The cost of living in the US declined last month, as expected, as energy price inflation ebbed.

According to the Bureau of Labor Statistics, the US consumer price index was flat in November in month-on-month terms (consensus: 0.0%), as energy prices dropped by 2.2%, with those of gasoline down by 4.4%.

Versus one year ago, the CPI rate of advance slowed from October's pace of 2.5% to 2.2% (consensus: 2.2%).

So-called 'core' inflation, excluding food and energy, was higher by 0.2% on the month and by 2.2% on the year.

Used car and trick prices saw the steepest increase, rising by 2.4%, alongside a 0.3% rise in shelter costs and a 0.4% jump in the prices for medical care services.

Going the other way, apparel prices declined by 0.9% and those of transportation services by 0.3%.

On a related note, heading into the next meeting of the Federal Open Market Committee, on 18-19 December, analysts at Bank of America-Merrill Lynch forecast rate-setters on the Potomac would go ahead with a 25 basis point hike in the target range for the fd funds rate to between 2.25%-2.50%.

However, they expected a 'dovish' twist in policymakers' communications, which they said "sharply reduces the likelihood that the Fed delivers four hikes in 2019."

"The reduction in the Fed's median dots will likely be seen as a market friendly capitulation and the market is already anticipating such a move with current market pricing suggesting

"We expect USD to weaken particularly against risk sensitive FX off of Fed communication."

For their part, Mickey Levy and Roiana Reid at Berenberg Capital Markets said: "Inflation remains in check. Prices of goods are being suppressed by declines in energy prices and the U.S. dollar strengthening since the summer that is weighing on non-petroleum import prices. This is offsetting the upward price pressures from rising prices of services amid diminished slack in a strong economy and tariffs.

"The November CPI is the last major consumer price data before the December 18-19 FOMC meeting and it keeps the Fed on track for a rate hike then. The deceleration in inflation in H2, however, clouds the path of Fed policy beyond December."