WASHINGTON – The United States saw a halt in the cost of living increase in October, with falling gasoline prices contributing to the smallest rise in consumer prices in more than a year. This development indicates that the Federal Reserve’s efforts to combat inflation may be gaining traction. Contrary to expectations of a 0.1% rise, the consumer-price index remained unchanged, bringing the yearly inflation rate down to 3.2% from 3.7%.
While overall inflation showed signs of cooling, core consumer prices, which exclude volatile food and energy costs, edged up by 0.2% for the month. Despite this increase, the annual core inflation rate softened to a two-year low of 4%, yet it remains stubbornly close to double the Federal Reserve’s target of 2%. The central bank has signaled that it may need to continue raising borrowing costs if these core prices do not show further signs of significant decline.
The mixed bag of economic data included:
- A substantial 5.3% decrease in gasoline costs.
- A modest 0.3% rise in food costs, adding to household budget pressures with grocery prices surging by 5% over the past year.
- Shelter costs inching up by 0.3% last month, while rents jumped by 0.5% for the month and 7.2% annually.
- Medical costs climbed by 0.3% in October, marking their third consecutive monthly increase.
Despite these increases, there is cautious optimism among some economists about the long-term battle against high inflation. Corporate economist Robert Frick from Navy Federal Credit Union views October as a victory in this ongoing fight, while Bill Adams from Comerica (NYSE:) Bank suggests that the cooler-than-expected CPI report could lead to potential interest rate cuts in 2024.
In response to the latest CPI data, financial markets indicated optimism with futures pointing towards a higher opening for both the (DJIA) and . The yield on the benchmark 10-year Treasury note also dipped to 4.48%. Investors are now looking ahead to the Fed’s mid-December meeting, where the soft inflation reading could influence decisions on future interest rate adjustments.
Federal Reserve Chair Jerome Powell remains vigilant, warning against premature conclusions that inflation risks have subsided, as he continues to monitor economic indicators closely.
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