Annual inflation rates slowed more than expected in October—starting to break months of entrenched rising prices.
- The Bureau of Labor Statistics released its monthly report on Thursday and reports the annual consumer price index (CPI) came in at 7.7% for the month of October. Core prices slowed to 6.3%.
- This marked a notable decrease from 8.2% in September and its peak of 9.1% in June.
- It is still far from the Federal Reserve’s goal of 2% inflation.
- The Fed has consistently raised interest rates in 2022 to lower inflation, with four consecutive 75-basis-point hikes just this year. A hike of at least 50 basis point is expected for December.
- This marks the lowest inflation increase in eight months, Reuters reports.
Why it’s News
These increases are a surprise to economists, who have feared that inflation was becoming entrenched and refusing to slow down.
“U.S. inflation cooled in October by more than forecast, offering hope that the fastest price increases in decades are ebbing and giving Federal Reserve officials room to slow down their steep interest-rate hikes,” says Bloomberg.
The news will be unlikely to change the direction of the Fed for the immediate future, which has promised a bullish response and future interest-rate hikes until inflation is under control. If the improvements hold though the Fed may lighten its response going into 2023.
“The fight against inflation is far from won, with other data from the Labor Department on Thursday showing a moderate increase in the number of Americans filing new claims for unemployment benefits last week, pointing to a still-tight jobs market. Nevertheless, the rare good news on inflation sparked a rally on Wall Street and sent U.S. Treasury yields tumbling,” says Reuters.
“The soft October core CPI print offers Fed doves a powerful justification to slow the pace of rate hikes going forward. More widespread disinflation across goods sectors, and a measurement quirk in medical care services—factors we expect to continue in the months ahead—helped bring down inflation in October,” says economist Anna Wong.