Inflation rate fell to 3.1% in November as plummeting gas prices offset rising costs of cars, insurance, and dining out

At the same time, the latest data on consumer inflation showed that prices in some areas — services such as restaurants, used cars and auto insurance — continued to rise uncomfortably fast.

Tuesday’s report from the Labor Department said the consumer price index rose just 0.1% from October to November. Compared with a year earlier, prices were up 3.1% in November, down from a 3.2% year-over-year rise in October.

Core prices, which exclude volatile food and energy costs, rose 0.3% from October to November, slightly faster than the 0.2% increase the previous month. Measured from a year ago, core prices rose 4%, the same as in October. The Federal Reserve considers core prices to be a better guide to the future path of inflation.

The mixed picture in Tuesday’s inflation report will likely keep the Fed on track to leave its benchmark interest rate unchanged when its latest meeting ends Wednesday. Inflation still exceeds the Fed’s 2% annual target, which is why its officials are set to leave rates high. But with inflation cooling faster than expected, the Fed’s policymakers likely see no cause to further raise rates, at least for now.

The Fed’s widely expected decision to keep its key rate unchanged for a third straight time suggests that it’s probably done raising borrowing costs. The central bank has raised its key rate to about 5.4%, the highest level in 22 years, in a determined drive to conquer inflation. Its rate hikes have made mortgages, auto loans, business borrowing and other forms of credit much costlier, reflecting the Fed’s goal of slowing borrowing and spending enough to tame inflation.

Helping keep a lid on inflation has been a steady decline in gas prices. From a peak of $5 about a year and a half ago, the national average has dropped to $3.15 a gallon as of Monday, according to AAA. Grocery store inflation, by contrast, has proved especially persistent and a drain on many households’ finances.

Chair Jerome Powell and other Fed officials have welcomed inflation’s steady fall from 9.1% in June 2022. But they have cautioned that the pace of price increases is still too high for the Fed to let down its guard.

As a result, even if the central bank is done raising rates, it’s expected to keep its benchmark rate at a peak for at least several more months. Powell has even warned that the Fed might decide to raise rates again if it deems it necessary to defeat high inflation. The Fed raised its key short-term rate 11 times starting in March 2022.

According to a lesser-known inflation gauge that the Fed prefers, core prices rose 3.5% in October compared with 12 months earlier. That was less than the central bank’s forecast of 3.7% for the final three months of this year.

Inflation’s steady decline has sparked speculation about interest rate cuts next year, with some economists floating the potential for cuts as early as March. The Fed’s preferred inflation gauge has increased at an annual pace of just 2.5% in the past six months.

But Powell has so far brushed aside the idea that the Fed might cut rates anytime soon. He is expected to say so again Wednesday.

“It would be premature,” Powell said earlier this month, “to speculate” on the possibility of Fed rate cuts.