US inflation rose 2.7% in November— heating up for the second month in a row

US inflation rose in November from the pace it set a month earlier — heating up for the second month in a row — as the Federal Reserve weighs how quickly to press ahead with cutting interest rates.

The Consumer Price Index rose 2.7% versus a year ago last month — above the 2.6% increase seen in October, but falling in line with expectations, the Labor Department said on Wednesday.

Month-over-month, the CPI rose 0.3%, above economists’ expectations of 0.2%.

Core inflation, which excludes volatile energy and food prices, rose 3.3% versus a year ago in November.

Month-over-month, core inflation grew 0.3% — in line with a month earlier.

“The increase in the inflation rate won’t be enough to spoil Christmas,” Chris Zaccarelli, chief investment officer at Northlight Asset Management, said in a note. 

“The headline CPI was consistently above 3% in the beginning of the year and now it is consistently below 3%, so despite the fact that the series is a little noisy from month-to-month, we believe the Fed is likely to look through these fluctuations and continue on their easing path,” he added.

Interest rates are currently set to around 4.6%, above the 2.9% “neutral” rate that officials believe would help the economy chug along at a steady pace.

While policymakers largely agree that rates need to come down, there are doubts about how quickly cuts should be made.

Investors largely expect a third round of interest rate cuts from the Federal Reserve during their Dec. 17-18 meeting, though Fed Chair Jerome Powell has recently hinted at caution moving forward.

“We can afford to be a little more cautious as we try to find neutral,” Powell said at a New York Times event last week.

And during a press conference in November, he said: “Really the question is – is December….By December, we’ll have more data.”

Investors odds of a quarter-point rate cut shot up to 99.9% after the inflation report, up from 86.1% Wednesday morning, according to CME FedWatch.

Inflation has cooled significantly since its pandemic-induced peak of 9% in 2022, but officials are aiming to deliver on their 2% goal.

Though inflation has stayed above 2%, the central bank slashed its key lending rate by an outsize half point in September and again by a quarter point in November after President-elect Donald Trump’s victory.

Stock market futures remained flat after the inflation report, while the 10-year treasury yield ticked up about 0.02 percentage points.