US hits stubborn 'last mile' inflation challenge on way down

<p>Kia ora,</p><p>Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.</p><p>I'm David Chaston and this is the international edition from Interest.co.nz.</p><p>And today we lead with news financial markets are now turning their eyes to the US Fed meeting results tomorrow after it became clear today that while still easing, wringing the last bit of inflation's impulse from their economy could be tougher than first thought.</p><p>The US Fed targets 2%.</p><p>The American <a href="https://www.bls.gov/news.release/cpi.nr0.htm" target="_blank"><strong>November inflation rate</strong></a> came in exactly as expected, at 3.1% and down marginally from 3.2% in October. Their core rate (without food or energy) was unchanged at 4%. This unchanged result has markets reassessing those 2024 rate-cut bets. Inflation in the world's largest economy is sticky at the end of its cycle and getting it back to 2% isn't going to be as straight forward as anticipated by financial markets. The Fed's caution is being justified.</p><p>Food prices rose +2.9% and fuel prices fell -5.4% so they are not weighing on the overall level. But rent is, up +6.5%. And airfares are up more than +10% in the year.</p><p>The <a href="https://www.redbookresearch.com/" target="_blank"><strong>Redbook index</strong></a> of bricks & mortar retail store sales on a same-store basis rose +3.4% last week, so the engine of American retail sales is still expanding on a volume basis.</p><p>American small business owners are still feeling the pressure however, but more from a tight labour market than from demand. 40% of all owners reported job openings they could not fill in the current period, <a href="https://www.nfib.com/content/press-release/economy/small-business-owners-pessimistic-about-future-business-conditions/" target="_blank"><strong>keeping them glum</strong></a> even if business is expanding faster.</p><p>In Canada, they have a housing crisis - and perhaps <a href="https://www.cbc.ca/news/po