Key takeaways

  • Headline inflation continues to fall, but core inflation remains sticky at a level higher than what the Federal Reserve wants.
  • Elevated wages in the services sector continue to add an element of stickiness to core inflation.
  • Given this inflation print, it appears less likely that the Fed will implement a rate cut in the upcoming March 2024 meetings.


Megan Werner

Digital Content Writer & Editor, J.P. Morgan Wealth Management

The November 2023 Consumer Price Index (CPI) report from the Bureau of Labor Statistics (BLS) confirmed expectations that headline inflation continues to cool while core inflation that strips out volatile food and energy costs is proving sticky at 4% annually.

Headline inflation, as measured by the CPI, showed a slight increase of 0.1% on a seasonally adjusted basis, following an unchanged rate in October.1 Over the past 12 months, the all-items index has seen a 3.1% rise before seasonal adjustment, aligning closely with economists' predictions.2

This is good news, as some wondered just how hot inflation would come in. “There was some concern that inflation might come in a bit hotter-than-expected in November. That didn’t happen. Overall, the report was in line with market expectations,” remarked Shawn Snyder, Global Investment Strategist for J.P. Morgan Wealth Management.

Report highlights

Gasoline prices fell 6% in November, and gas prices nationally have fallen from $3.96 per gallon on average in August to $3.44 in November. Year-over-year (YoY), gas prices have fallen 8.9%. That decline has offset the increases in costs associated with used cars and hotel room expenses, which have been significant drivers of core inflation in the second half of 2023.

The food index's modest increase of 0.2% in November, down from 0.3% in October, further illustrates the trend of volatile prices coming down while core prices continue to grow at around 4% per year. “Even though the pace of inflation is slowing, consumers are still feeling the bite. While Wall Street tends to focus on the headline YoY pace of inflation, which came in at 3.1% in November, consumers are focused on prices staying elevated with broad inflation up 17.9% since the end of 2021. Food prices are up 20% over the same period,” Snyder observed.

The index for food at home saw a 0.1% rise over the month, while the index for food away from home climbed by 0.4%. The key driver of slower food cost inflation was a 0.2% decrease in the meats, poultry, fish and eggs index. The food-away-from-home index rose 0.4 % again in November, as has done in October and September. Full-service meals were 0.5% more expensive month-over-month (MoM).

Though core inflation, which excludes food and energy, remains a more significant indicator for the Fed’s decision-making, the rise in costs for food away from home underscore the effects of rising labor wages. In support of this, the BLS reported a notable jump in average hourly earnings for all nonfarm employees by 12 cents, or 0.4%, in November. This increase brings the yearly wage growth to 4%.3

As the final major data set released before the Fed’s December policy meeting, these figures carry substantial weight. In the housing sector, both the rent index and the owners' equivalent rent index rose by 0.5% in November, while the lodging-away-from-home index decreased by 0.9%. The shelter index emerged as the largest contributing factor to the monthly increase in the index for all items less food and energy. The difference between the rent index and the lodging-away-from-home index may be of comfort to inflation doves, however, as it shows demand for travel inside the U.S. waning, which is another sign of a cooling economy.

In the automotive sector, the used cars and trucks index reversed its previous trend, rising 1.6% in November after five consecutive months of decreases. Over the last 12 months, the all items less food and energy index held steady with a 4% increase, matching the rise seen in the 12 months ending in October.

Shifting expectations

An intriguing aspect of the current economic climate is the shift in inflation expectations. According to the November Survey of Consumer Expectations, median inflation expectations slightly declined to 3.4% at the one-year-ahead horizon, marking the lowest reading since April 2021. However, expectations remained unchanged at 3.0 % and 2.7 % at the three- and five-year-ahead horizons, respectively.4 These expectations are a crucial element of the Fed’s rationale for maintaining higher interest rates for a longer duration because higher inflation expectations can become self-fulfilling. Lower inflation expectations give the Fed room to leave rates where they are or start cutting in the coming year if economic conditions deteriorate.

The bottom line

Given this inflation print, it appears less likely that the Fed will implement a rate cut in the upcoming March 2024 meeting. “The good news is that the pace of inflation has slowed noticeably since mid-2022. This should give the Fed some confidence that tighter monetary policy is working. Thus far, it has done so without job losses,” commented Snyder, going on to add, “In terms of the Fed, we think their rate hiking cycle is over and are expecting to see rate cuts in the back half of 2024 as the Fed seeks to normalize its policy.” Following this, it seems clear that this data will not prompt the Fed to increase rates at their meeting later this week.

This balancing act reflects the Fed's ongoing challenge: to navigate between curbing inflation and fostering economic stability, especially in a landscape marked by varied inflationary pressures across different sectors. On this, Snyder says, “Heading into 2024, the big question facing markets is whether closing the gap between 3% inflation and the Fed’s target of 2% inflation will eventually tip the labor market into contraction.” The evolving economic data, particularly regarding inflation and wage growth, will continue to play a pivotal role in shaping the Fed's policy decisions in the coming months.



Bureau of Labor Statistics (BLS). “Consumer Price Index Summary.” (December 2023)


FactSet. “Consumer Price Index (CPI) for November 2023 is projected to rise 3.1% year-over-year.” (December 2023)


Archival Federal Reserve Economic Data (ALFRED), St. Louis Federal Reserve. “Average Hourly Earnings of Production and Nonsupervisory Employees, Total Private.” (December 2023)


Federal Reserve Bank of New York. “Inflation Expectations Decline Slightly at the Short-Term Horizon to Lowest Level since 2021.” (December 2023)

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