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US inflation decelerating in boost to economy

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US prices fell in November for the first in more than 3-1/2 years, pushing the annual increase in inflation further below 3 percent, and boosting financial market expectations of an interest rate cut from the Federal Reserve next March.

The report from the Commerce Department on Friday also showed underlying inflation pressures continuing to subside. Cooling inflation left more income at the disposal of households, helping to underpin consumer spending and the overall economy as the year winds down.

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This was yet another data set showcasing the durability of the economic expansion, thanks to a resilient labor market. The economy has defied dire predictions of recession from economists and some business executives going back to late 2022.

"(Fed) Chair (Jerome) Powell couldn't have asked for a better present this year," said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. "So far at least, the endgame is turning out better than the Fed or nearly anyone could have imagined at the start of the year. While the Fed won't rush into cutting rates, it's likely now just a matter of time."


Inflation, as measured by the personal consumption expenditures (PCE) price index, fell 0.1 percent last month, the Commerce Department's Bureau of Economic Analysis said. That was the first monthly decline in the PCE price index since April 2020 and followed an unchanged reading in October.

Food prices edged down 0.1 percent and energy prices dropped 2.7 percent. In the 12 months through November, the PCE price index increased 2.6 percent after rising 2.9 percent in October. October marked the first time since March 2021 that the annual PCE price index was below 3 percent.

Economists polled by Reuters had forecast the PCE price index unchanged on the month and rising 2.8 percent year-on-year.

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