MICHEL MARTIN, HOST:
Gasoline prices have fallen sharply in recent weeks. That's helping to keep overall inflation in check and may be improving the national mood as well. We got a report card on the cost of living this morning, just as the Federal Reserve prepares to hold its last policy meeting of the year. NPR's Scott Horsley is with us now with the details. Good morning, Scott.
SCOTT HORSLEY, BYLINE: Good morning, Michel.
MARTIN: So what does today's inflation report show?
HORSLEY: It shows that consumer prices in November were up 3.1% from a year ago. That's a smaller increase than the month before and less than half the inflation rate we saw at the beginning of this year, so it is moving in the right direction. Rents and health care costs were up again again last month, but that was largely offset in November by cheaper airfares, cheaper hotel rooms and especially by that big drop in gasoline prices.
MARTIN: What's behind that?
HORSLEY: It's mostly a supply-and-demand story. Demand for gas typically dips in the wintertime 'cause people aren't driving as much, and we've also got ample supplies. Domestic oil drillers are producing record amounts of oil, and the price of crude oil has come down pretty sharply since September. At the pump, the average price of regular gasoline is now about $3.14 a gallon. That's about 25 cents less than it was a month ago. And AAA's Andrew Gross says gas prices could fall further in the weeks to come.
ANDREW GROSS: We're seeing about 60% of all gas stations nationwide are now selling gasoline below $3 a gallon. And it's possible the national average could dip - maybe by the end of this year, maybe early January - could slide below that $3 barrier.
HORSLEY: And, of course, gasoline prices are some of the most visible prices in the country, so we know they tend to have an outsized impact on people's overall feelings about the economy.
MARTIN: OK, what about those feelings? How are people feeling, Scott?
HORSLEY: You know, not great, but better than they were. The University of Michigan Survey of Consumer Sentiment came out last week, and it did show a marked improvement, basically reversing 4 months of deep funk that people had been falling into. Joanne Hsu, who directs the University of Michigan survey, says the relief people have been feeling at the gas pump is starting to sink in.
JOANNE HSU: I think consumers have been reserving judgment over the last few months over whether or not the easing of gas prices was actually going to stick. And after a few consecutive months of gas price declines, I think consumers are starting to feel more secure in the trend in the slowdown in inflation.
HORSLEY: Certainly, the national mood is not as rosy as it was back before before the pandemic, but attitudes have been improving since last summer, when they hit rock bottom, just as gas prices were at an all-time high. And Hsu says the improvement in consumer sentiment is really broad-based. It cuts across all different ages and income levels and political parties.
MARTIN: OK. So the Federal Reserve begins a two-day meeting today. Do you have a sense of what the Fed thinks about the inflation outlook?
HORSLEY: Well, Fed policymakers have said they're relieved to see this moderation of inflation in recent months, but they're not really swayed by what happens with gasoline prices because, as we all know, those prices bounce up and down a lot. The Fed tends to focus on prices other than energy and food, and that so-called core inflation rate for November was 4% - the same as it was in October. It has come down from its high last year, but it's still about twice as high as the central bank's 2% inflation target.
So pretty much everybody thinks the Fed's going to hold interest rates steady when they meet this week. There's not much suspense about that. What investors will be on the lookout for, though, is any signal about what might happen to interest rates next year.
MARTIN: That is NPR's Scott Horsley. Scott, thank you.
HORSLEY: You're welcome.
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