Consumer prices rose 0.4% in October, less than expected, according to the Bureau of Labor Statistics (BLS). The Consumer Price Index (CPI) increase was slower than the 0.6% rise in September and below economists’ estimates of a 0.5% rise in October. Prices for food and energy fell last month, offsetting increases in other areas like housing, health care, and transportation.
While inflation is still a danger to the U.S. economy, the consumer price index increased less than anticipated in October, suggesting that pressures may be beginning to ease.
According to data released by the Bureau of Labor Statistics on Thursday, the index, a comprehensive gauge of prices for goods and services, rose 0.4% for the month and 7.7% from a year earlier. According to Dow Jones, the respective increases would have been 0.6% and 7.9%.
When volatile prices for food and energy are excluded, the so-called core CPI grew 0.3% for the month and 6.3% annually, above the corresponding forecasts of 0.5% and 6.5%.
The price of used cars fell by 2.4%, which contributed to a decrease in inflation rates. Medical care services had a 0.6% decrease in price and apparel prices a 0.7% decline.
According to Mark Zandi, chief economist of Moody’s Analytics, “the report overstates the argument that inflation is coming in, but it makes a case inflation is coming in.” “It’s very obvious that inflation has reached its peak and is turning around. Assuming nothing unexpected happens, all trend lines indicate that it will continue to moderate moving forward.
The Dow Jones Industrial Average increased by more than 1,000 points as a result of the report’s dramatic market reaction. The policy-sensitive 2-year note saw a steep decline in yields, dropping 0.3 percentage points to 4.33%.
According to Michael Arone, chief investment strategist at State Street Global Advisors, “the trajectory in inflation is a good one, so that’s wonderful news in terms of the report.” Although I don’t think the Powell shift will happen very soon, investors are still credulous and anxiously waiting for it. Therefore, I believe that this morning’s enthusiasm was rather exaggerated.
The term “Powell pivot” refers to market predictions that Federal Reserve Chairman Jerome Powell and his central bank counterparts would soon reduce or cease the rapid pace of interest rate rises they have been using to attempt to lower inflation.
Even if the inflation rate has slowed down, it still exceeds the Fed’s 2% objective, and the report’s many sections demonstrate that the cost of living is still high.
In reaction to the CPI statistics, San Francisco Fed President Mary Daly said: “One month of data does not a triumph make, and I think it’s really essential to be aware that this is just one piece of positive information, but we’re looking at a full collection of facts.”
In a Q&A session with the European Economics & Financial Centre, she continued, “We have to be determined to get inflation down to 2% on average.” That is our objective, what Americans depend on, and what we are dedicated to achieving. We will thus keep changing the policy till the project is finished.
The cost of housing, which accounts for nearly one-third of the CPI, increased by 0.8% last month, the greatest monthly increase since 1990, and by 6.9% over the previous year, the highest annual increase since 1982. Additionally, the price of fuel oil shot up by 19.8% for the month and is now up 68.5% year over year.
The central bank authorised its fourth successive 0.75 percentage point rise in the benchmark rate at the beginning of November, raising it to a range of 3.75%-4%, the highest level in 14 years. Before the fed funds rate reaches its peak of roughly 5% early next year, markets anticipate the Fed to keep hiking rates, but probably at a slower rate.
Traders swiftly revised their predictions for the Fed’s subsequent action. According to CME Group statistics, futures linked to the fed funds rate suggested an 80.6% likelihood of a 0.5 percentage point change in December, up from a 56.8% probability the day before.
One piece of data does not constitute a trend. The next data, which is released the day before the next Fed meeting, should hopefully show another decline in the CPI, according to Randy Frederick, managing director of trading and derivatives at Charles Schwab. “Markets are ready to react to anything even slightly favourable. It more closely resembles a coiled spring than anything else.
Inflation control is essential as we approach the Christmas shopping season. According to a recent poll by Clever Real Estate, around one-third of Americans want to reduce their spending this year as a result of rising costs.