Inflation Was Up in November, but is Likely to Remain Muted

December 11, 2019

Consumer prices were up more than expected in November. Prices were up 2.1 percent annually last month, up from October’s 1.8 percent, mainly due to increases in energy and housing costs. The Fed said in their most recent meeting that they were unlikely to make changes to the interest rates until the economy saw sustained inflation. Economists say this is unlikely anytime soon.

With unemployment at a decades-long low and wages increasing, one would expect inflationary pressure to increase. However, a recent article from the Wall Street Journal points to U.S. unit labor costs, a measure of labor cost and production output for companies, as a major contributing factor for inflation. The economists who spoke to the WSJ note that companies seem less willing to pass along these labor costs to consumers in the form of higher prices. Companies already have diminished pricing power due to factors like globalization and comparison shopping, so it is unlikely that we will see sustained inflation any time soon.

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