Inflation fell to an annual rate of 3.2% in October from 3.7% in September, according to the latest Consumer Price Index report.
Consumer prices eased last month, which suggests the Federal Reserve is making headway on inflation despite a strong and resilient U.S. economy.
The Consumer Price Index (CPI), which measures the price fluctuations of a broad basket of goods and services in the United States, was unchanged in October after rising 0.4% in September, per a November 14 news release from the U.S. Bureau of Labor Statistics (BLS).
According to the news release, inflation remained unchanged from September to October due to rising shelter costs offsetting gasoline declines.
Over the last 12 months, the headline reading increased 3.2% before seasonal adjustment, ticking down from 3.7% in September and August.
Meanwhile, core inflation, which excludes the volatile food and energy sectors, rose at an annual rate of 4% in October, down from 4.1% the month prior, logging “its smallest 12-month change since the period ending in September 2021,” BLS stated.
The seasonally adjusted indexes with notable increases in October include rent (+0.5%), owners’ equivalent rent (+0.4%), motor vehicle insurance (+1.9%), medical care (+0.3%), recreation (+0.1%), and personal care (+0.4%).
The indexes for energy (-2.5%), energy commodities (-4.9%), gasoline (-5.0%), lodging away from home (-2.5%), used cars and trucks (-0.8%), communication (-0.3%), and airline fares (-0.9%), were among those that decreased last month.
October’s data suggests the Fed is gaining positive momentum, according to PNC senior economist Kurt Rankin.
“A sharp decline in Energy prices for October 2023 helped Topline CPI growth fall from August and September’s abrupt spikes upward,” Rankin told The Dallas Express in an email. “Although the Fed determines monetary policy based upon Core inflation results, households are unable to gloss over the cost of gasoline and utilities.”
Over the past 12 months, the gasoline index fell by 5.3%, the natural gas index declined by 15.8%, and the fuel oil index dropped by 21.4%, according to the report. The used cars and trucks index also dropped sharply, falling 7.9% over the year.
Other indexes with notable increases over the last 12 months include transportation services (+9.2%), shelter (+6.7%), food (+3.3%), food at home (+2.1%), and medical care commodities (+6.1%).
According to Richard Flynn at Charles Schwab UK, the Fed’s aggressive monetary policy has caused inflation to decelerate, which has increased the prospect of a soft landing.
“This good news reinforces the likelihood that central bankers will hold off from further rate hikes in this cycle, which is the direction they seem to be leaning in any case,” said Flynn, per Yahoo Finance.
The probability of a rate increase at December’s monetary policy meeting stood at 5.2% as of market opening on November 14, according to the CME FedWatch Tool, which tracks Fed futures. This means there is a 94.8% chance the Fed will leave interest rates unchanged in December, the same as it did in November, as previously reported by The Dallas Express.
Still, even as inflation cools, the Fed is not likely to become dovish in any of its policy speeches, according to Jeffrey Roach, chief economist at LPL Financial.
“Despite the deceleration, the Fed will likely continue to speak hawkishly and will keep warning investors not to be complacent about the Fed’s resolve to get inflation down to the long-run 2% target,” said Roach, CNBC reported.