Consumer Prices Mixed-To-Soft

A mixed-to-soft consumer price report for November won't be adding much rate-hike pressure at next week's FOMC meeting. The CPI came in as expected at no change with the ex-food ex-energy core rate also at expectations, up 0.2 percent.

Energy fell 2.2 percent in the month with gasoline down 4.2 percent reflecting the month's $20 drop in oil. Sharp declines were also posted for apparel at minus 0.9 percent, transportation down 0.8 percent, and education/communications down 0.5 percent.

Housing, which is the main component in the CPI, held at trend with a moderate 0.3 percent rise with medical care, another large component, picking back up with a 0.4 percent increase. It's these two components that are behind the rise in the core rate.

Year-on-year rates are mixed, down 3 tenths overall to 2.2 percent but up 1 tenth for the core which is also at 2.2 percent. These rates are consistent with the Fed's 2 percent policy goal.

Even though there's no evidence of unwanted pressure in this report, the risk for the Fed is that lack of available labor in the jobs market may begin to slow the economic expansion and no less importantly begin to raise wages which are inflationary pressures not tracked in this report.