The U.S. annual inflation rate eased to 7.7 percent in October, down from 8.2 percent in September, according to new data from the Bureau of Labor Statistics (BLS).
The core inflation rate, which eliminates the volatile energy and food sectors, also dropped to 6.3 percent last month, down from 6.6 percent.
On a month-over-month basis, the consumer price index (CPI) rose 0.4 percent, while the core CPI edged up 0.3 percent.
The market consensus was an 8 percent reading in October. But some estimates had suggested a higher figure.
The Federal Reserve Bank of Cleveland’s Nowcast anticipated an 8.1 percent print, while Trading Economics also projected an 8.1 percent headline number.
Dow futures were up more than 600 points after the October inflation came in lower than predicted.
November and Beyond
Looking ahead to November, the Cleveland Fed Bank’s Nowcast expects the CPI to touch 8 percent and the core CPI would clock in at 6.6 percent.
Overall, economists are expecting a fifth consecutive 75-basis-point increase to the benchmark federal funds rate at the Federal Reserve’s December policy meeting. At the same time, according to the CME FedWatch Tool, more investors think the Federal Open Market Committee (FOMC) will approve a smaller half-point rate hike next month.
Richmond Fed Bank President Thomas Barkin recently told the Top of Virginia Chamber of Commerce at Shenandoah University that the central bank has learned from the 1970s, meaning that it cannot “let inflation fester and expectations rise.”
“We have been mandated by Congress to maintain stable prices and we are doing what it takes to get inflation back to our 2 percent target,” he stated.
“After two-and-a-half years of instability, we’re all ready to get back to normal,” Barkin added. “But what’s normal? I’d say normal is not going back to where we were.”
The University of Michigan’s one- and five-year inflation expectations rose to 5.1 percent and 2.9 percent, respectively, in October.
“The median expected year-ahead inflation rate rose to 5.0%, with increases reported across age, income, and education,” said UMich Surveys of Consumers Director Joanne Hsu in a news release. “Last month, long run inflation expectations fell below the narrow 2.9–3.1% range for the first time since July 2021, but since then expectations have reverted to 2.9%. Uncertainty over inflation expectations remains elevated, indicating that inflation expectations are likely to remain unstable in the months ahead.”
Although Fed Chair Jerome Powell told reporters during this month’s post-FOMC meeting press conference that the institution will likely push the fed funds rate to above the 4.5 percent and 4.7 percent range, traders are still discussing the possibility of a so-called Fed pivot sometime next year.
“We still have some ways to go,” Powell said. “And incoming data since our last meeting suggests that the ultimate level of interest rates will be higher than previously expected.”
According to John Lynch, the CIO at Comerica Wealth Management, the U.S. central bank’s tightening crusade is “having its intended effect of slowing the economy, although not enough to end the tightening signal.”
“‘Higher for longer’ becomes the mantra for a Fed determined to restore price stability, bringing inflation growth down to the central bank’s preferred 2.0% range,” Lynch wrote in a recent note (pdf).
Speaking in an interview with Bloomberg TV, former Treasury Secretary Larry Summers suggested that the central bank may need to increase interest rates to above 6 percent to quash rampant price inflation. This would be the highest level in more than two decades.
From The Epoch Times