In October, consumer prices in the United States held steady, marking a notable contrast from the prior month, with a drop in oil prices weighing down headline inflation. The latest data from the Bureau of Labor Statistics, released on Tuesday morning, revealed that the Consumer Price Index (CPI) showed no change over the previous month, maintaining a 0% increase, while registering a 3.2% rise over the prior year. This represents a deceleration compared to September’s 0.4% monthly increase and 3.7% annual gain in prices.
Economists’ predictions, as per Bloomberg data, anticipated a 0.1% month-over-month increase and a 3.3% year-over-year rise, highlighting the unexpected stability in consumer prices. The lower-than-expected figures were primarily influenced by a drop in energy costs, with energy prices experiencing a 2.5% month-over-month decrease, propelled by a 5% reduction in gas prices during October.
On a “core” basis, which excludes the more volatile costs of food and gas, prices in October saw a 4.0% increase over the previous year. This represents a moderation from September’s annual rise, according to Bloomberg data. Monthly core prices climbed 0.2%, also lower than the 0.3% rise observed in September. Economists had anticipated a 0.3% rise over the prior month and a 4.1% increase over the prior year.
Following the release of the data, US stocks experienced an early surge in trading. Concurrently, Treasury yields declined by 2 basis points, trading near 4.6%.
Despite the stable headline figures, inflation has remained notably above the Federal Reserve’s 2% target. However, market sentiment leans towards the belief that the Federal Reserve is unlikely to raise rates in December. This sentiment is fueled, in part, by Federal Reserve Chair Jerome Powell’s recent remarks, where he emphasized a cautious approach.
“Slowing down is giving us, I think, a better sense of how much more we need to do, if we need to do more,” Powell stated earlier this month, following the central bank’s decision to maintain rates for a second consecutive meeting.
Post-data release, market expectations solidified, with nearly a 100% chance that the Federal Reserve will keep rates unchanged in December, as indicated by data from the CME Group.
Additional insights from the inflation report highlight the shelter index, which exhibited a 6.7% increase on an unadjusted, annual basis — the slowest uptick in a year. The shelter index was a key contributor to the monthly increase in core inflation, rising by 0.3% month-over-month, albeit at a slower pace than September’s 0.6% jump.
Within core inflation, rent increases remained elevated but displayed signs of easing. The index for rent and owners’ equivalent rent rose by 0.5% and 0.4% on a monthly basis, respectively. Owners’ equivalent rent refers to the hypothetical rent a homeowner would pay for the same home.
Other notable increases in consumer prices in October included motor vehicle insurance, which saw a 1.9% uptick after a 1.3% rise the previous month. Additionally, indexes for recreation, personal care, and apparel recorded increases during the month.
Source: Yahoo Finance
