By Quasar Elizundia, Expert Research Strategist – Pepperstone

“Inflation in the United States has returned to the spotlight with the release of data for November 2024. According to the U.S. Bureau of Labor Statistics, the headline Consumer Price Index (CPI) showed a 2.7% year-over-year increase, aligning with market expectations and slightly above the 2.6% recorded in October. On a monthly basis, the CPI rose by 0.3%, marking the largest increase since April.

From a core perspective, the Core CPI—which excludes food and energy—remained steady at 3.3% year-over-year, consolidating the persistence of inflation above the Federal Reserve’s 2% target. This figure, while anticipated, underscores the challenges for the Fed in bringing price increases to target levels without destabilizing the economy.

The breakdown of CPI components reveals mixed trends. While energy costs continued to decline (-3.2% year-over-year), food prices increased by 2.4%, driven by rising prices for meats, poultry, and eggs (+3.8%). In the housing sector, the main contributor to the monthly increase, the shelter index rose by 0.3%, accounting for nearly 40% of the overall rise.
The financial market reaction was relatively mixed. The U.S. dollar initially weakened following the data but later regained some lost ground. In Latin America, the absence of an inflationary surprise was met with relief, temporarily benefiting the main LATAM currencies.

Looking ahead, markets are currently pricing in a more moderate monetary policy for 2025, with expectations of three 25-basis-point cuts that could bring rates down to the 3.5%-3.75% range by year-end. However, the economic policies proposed by Donald Trump—such as tariffs and mass deportations—emerge as key variables in determining the effective future direction of prices in the U.S.

Ultimately, while the data was not surprising, it underscores the complexity of the current inflationary environment, where even more intricate factors are poised to play a crucial role in the coming quarters.”

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