What's happened
US inflation remains above the Federal Reserve's 2% target, with consumer prices rising 2.8% in November. Despite slowing job growth and a cooling labor market, consumer spending stays strong, and economic growth is healthy. The Fed is likely to hold interest rates steady next week.
What's behind the headline?
The Federal Reserve faces a complex balancing act. While inflation has eased slightly, it remains above target, partly due to lingering supply chain disruptions and tariffs. The slowdown in hiring suggests the Fed may keep interest rates steady to avoid tipping the economy into recession. However, persistent inflation pressures and strong consumer spending indicate that rate cuts are unlikely in the near term. The low unemployment rate masks underlying weaknesses in job creation, especially for new graduates and long-term unemployed. The recent data suggests the Fed will prioritize maintaining tight monetary policy to prevent inflation from rebounding, even as economic growth shows signs of moderation. This cautious stance aims to prevent a resurgence of inflation while supporting the labor market, but it risks prolonging economic uncertainty if growth continues to slow.
What the papers say
The New York Times reports that inflation has remained above the Fed's target, with consumer prices rising 2.8% in November, and highlights the slow job growth and consumer sentiment concerns. The NY Post emphasizes that despite inflation easing, the economy remains resilient, with consumer spending climbing 0.5% in November, and suggests the Fed will likely hold rates steady. The other sources, including AP News and The Independent, reinforce that inflation has plateaued but remains above target, and that economic growth is still strong, with recent quarterly expansion at 4.4%. Reuters notes that UK inflation remains high but is expected to slow, providing a comparative context. Overall, these sources depict a US economy with subdued inflation but persistent growth and employment challenges, influencing Fed policy decisions.
How we got here
Inflation in the US has been above the Fed's 2% target since 2021, driven by factors including tariffs and supply chain issues. Despite a slowdown in job creation, the labor market remains tight, with low unemployment. Recent data shows consumer spending remains resilient, supporting ongoing economic growth, while inflation has plateaued after peaking in 2022.
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More on these topics
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A consumer price index measures changes in the price level of a weighted average market basket of consumer goods and services purchased by households.
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In economics, inflation is a general rise in the price level of an economy over a period of time.
When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation reflects a reduction in the purchasing power