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With Financial Experts Waiting for Final Inflation Report, Many Expect Prices to Remain High

Shoppers carry bags of purchased merchandise at the King of Prussia Mall on December 11, 2022 in King of Prussia, Pennsylvania. cnbc.com
Shoppers carry bags of purchased merchandise at the King of Prussia Mall on December 11, 2022 in King of Prussia, Pennsylvania. cnbc.com

As financial experts wait for the final inflation report of the year to show moderation of high consumer prices, others say that a normal inflation level could be long and heavy.

The United States Labor Department is set to release the highly anticipated consumer price index (CPI) report Tuesday morning, showing just how hot inflation ran in November.

Economists expect the gauge, which measures a basket of goods, including gasoline, health care, groceries, and rent, to show that prices rose 0.2 percent from the previous month – down from the 0.4 percent reading in October. On a yearly basis, inflation is projected to have climbed by 7.3 percent.

The report is likely to show underlying momentum in inflation as home and rent prices march higher. Core prices, which exclude measurements of food and energy, are expected to climb 0.4 percent from the previous month (up from 0.3 percent in October) and 6.1 percent from the same time last year.

Even though consumers have recently received a little relief from inflation in the form of lower gas prices, the latest CPI report will show that food and recent costs have increased. The latest information is a concern, given that higher housing and food costs directly affects household budgets.

The report has significant implications for the Federal Reserve, which is tightening monetary policy at the fastest rate in decades as it attempts to cool consumer demand and crush out-of-control inflation. 

According to economic analyst Mark Hamrick at Bankrate, "Whatever the forthcoming November report on inflation at the retail level looks like, it is not going to sound an all-clear on high prices. And that means the Federal Reserve will have more work to do by raising interest rates and keeping them higher for longer. The inflation fever is breaking, but it hasn’t gone away."

In November, policymakers approved a fourth consecutive 75-basis-point rate hike, lifting the federal funds rate to a range of 3.75 percent to 4 percent  indicating that more increases are coming. 

Policymakers are expected to approve a seventh straight rate hike at the conclusion of their two-day meeting on Wednesday, with most traders anticipating a 50-basis-point jump in the federal funds rate.

With inflation remaining high, there is a growing expectation on Wall Street that the Fed will trigger an economic downturn as it raises interest rates higher and threatens to hold them at elevated levels for longer. Should the November inflation data come higher than expected, it could raise the odds of a steeper rate hike when the officials meet this week and a more aggressive central bank in the coming months.

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