November Inflation - Take a "Peak?"

Consumer prices rose at the fastest annual pace in nearly 40 years last month, increasing pressure on the Federal reserve to tighten monetary policy sooner rather than later.  We believe there is a high likelihood that November readings mark peak inflation levels for this cycle.  Increasingly tough comps and tighter policy should cause the rate of price increases to level off in December before trending lower (while remaining elevated) in the first quarter of 2022.  Policymakers will meet for the last time in 2021 next week and are widely expected to accelerate tapering of the Fed’s bond-buying program, which would open the door for the Fed to begin increasing interest rates.  Entering 2021, officials were not anticipating rate increases until after 2023.  September dot plots showed expectations for one hike in 2022, but markets are pricing for two and the Fed will provide updated dot plots next week.

• Consumer prices (CPI) increased 6.8% year-over-year, in line with forecasts.  In November, the consumer price index (CPI) increased 6.8% compared to the same period a year ago.  Expectations ranged from 5.7% to 7.1% with a median of 6.8%.  Core CPI (excludes food and energy) increased at 4.6% year-over-year.  The increase was once again broad-based, with higher prices for energy, and new and used vehicles among the larger contributors.
• Consumer prices (CPI) increased 0.8% month-over-month.  In November, consumer prices as measured by CPI increased 0.8% compared to October.  Expectations ranged from 0.4% to 1.0% with a median of 0.7%.