In a report released Tuesday morning by the Bureau of Labor Statistics, it was revealed that consumer prices remained unchanged in October compared to the previous month. The Consumer Price Index (CPI) indicated a 0% increase over the last month, with a 3.2% rise over the prior year. This reflects a deceleration from September, which saw a 0.4% monthly increase and a 3.7% annual gain in prices.
Economists had predicted a slight uptick, forecasting a 0.1% month-over-month increase and a 3.3% year-over-year rise, according to data from Bloomberg. However, the actual figures defied these expectations.
The headline inflation was impacted by lower oil prices, as energy costs dropped by 2.5% month-over-month, primarily driven by a 5% decrease in gas prices during October.
On a “core” basis, which excludes the more volatile costs of food and gas, prices in October climbed 4.0% over the previous year. This marks a slowdown from the annual increase seen in September. Monthly core prices also rose by a modest 0.2%, lower than the 0.3% increase recorded in September.
Economists had anticipated a higher core inflation rate, predicting a 0.3% rise over the prior month and a 4.1% increase over the prior year.
The financial markets responded positively to the data, with U.S. stocks rising in early trading. Concurrently, Treasury yields ticked down 2 basis points to trade near 4.6%.
Despite the static headline inflation, the overall inflation rate has remained notably above the Federal Reserve’s 2% target. Investors, however, appear to be banking on the Federal Reserve maintaining the status quo in December. This sentiment is particularly influenced by recent statements from Fed Chair Jerome Powell, who emphasized the importance of assessing the need for further actions before making any adjustments.
“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 after the central bank held rates steady for a second consecutive meeting.
Immediately following the data release, market indicators suggested a nearly 100% chance that the Federal Reserve would keep rates unchanged in December, according to data from the CME Group.
Among the notable highlights from the inflation report is the shelter index, which recorded a 6.7% increase on an unadjusted, annual basis — the slowest rise in a year. The shelter index was the primary contributor to the monthly increase in core inflation, climbing 0.3% month-over-month, albeit at a slower pace than the 0.6% monthly jump observed in September.
Within core inflation, rent increases remained elevated but exhibited 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 represents the hypothetical rent a homeowner would pay for the same home.
Other indexes that experienced increases in October included motor vehicle insurance, rising 1.9% after a 1.3% increase the previous month. Additionally, the indexes for recreation, personal care, and apparel also showed increases during the same period.
In conclusion, consumer prices in October displayed a notable stability, with the headline inflation remaining unchanged, reflecting a complex interplay of factors influencing the economic landscape.
Source: Yahoo Finance
