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Special Report

Inflation Research Brief

November 2022

Decelerating Inflation Unlikely to Satisfy
Fed, Whose Actions Complicate Trading

Inflation falls to slowest pace since the start of the year. Headline CPI increased 7.7 percent over the 12 months ended in October, the smallest year-over-year increase since January 2022. While a notable deceleration compared to recent months, October’s downshift is unlikely to dissuade the Federal Reserve from raising the overnight lending rate again in December. The Federal Open Market Committee noted in its most recent forward guidance that it is looking for a clear trend of inflation normalizing toward the 2 percent target. Even so, the FOMC has also acknowledged that there is a delay between when monetary policies are put in place and when the economy responds, and last month’s slower price climb, paired with an uptick in unemployment, support a more moderate rate hike. The current expectation is for a 50-basis-point December rise in the fed funds measure, capping the fastest year of increases since the early 1980s.

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