Inflation hit a bump in October after falling for six straight months

CNN
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Annual inflation rose last month for the first time since March, as expected – but economists say the underlying trend remains favorable for another round of rate cuts.

Consumer prices rose 0.2% last month and rose 2.6% from a year earlier, according to the latest consumer price index data released Wednesday by the Bureau of Labor Statistics.

Housing-related inflation accounted for half of the monthly increase, and energy prices were flat after dragging down the overall index in four of the past six months. The Consumer Price Index measures price changes across commonly purchased goods and services.

Inflation has slowed significantly since peaking at 9.1% in June 2022 and has been steadily cooling.

Still, the October increase was expected due to unfavorable comparisons from a year ago and stubborn home-related inflation. Consensus estimates were for a 0.2% monthly increase and a 2.6% annual increase in the overall CPI, according to FactSet.

“The last quarter of 2023 was really fantastic for (progress on) inflation; and for the year-over-year rate to basically come down, you have to have something even better than that,” said Stephen Juneau, a Bank of America economist , told CNN in an interview Wednesday. “The bigger story about inflation is that, yes, prices are still going up, but the rate at which they’re going up has slowed significantly.”

While progress in reining in price increases appeared to have slowed slightly, Wednesday’s report also stressed that the last mile of taming inflation will be a struggle.

Excluding food and energy, two categories that can be quite volatile, core CPI rose 0.3% for the month and 3.3% from a year earlier, the same increases as in September.

Some of the biggest price increases from September were seen in used cars (up 2.7%), airfare (up 3.2%) and electricity (up 1.2%), according to the BLS report. Some economists said Wednesday that the increase in used car prices could be a reflection of hurricane-related buying.

Although the broader U.S. economy survived the sharpest run of inflation seen in a generation, Americans’ finances—and their emotions—were far from unscathed.

Inflation has been global in nature and caused by a confluence of events — the pandemic’s upheaval in demand trends and supply chains, Russia’s invasion of Ukraine, fiscal stimulus from both the Trump and Biden administrations — but American voters, worn down by high prices, signaled their emotions at the ballot box.

They chose to elect former President Donald Trump, who promised on the campaign trail to attack high prices by shaking things up. Economists have often sounded the alarm that not only are broad price cuts unrealistic and extremely dangerous, but also that Trump’s other proposals could actually cause inflation to rise again.

“If (Trump) continues what he said during his campaign, there will be an inflationary shock significantly larger than what the country suffered in 2021,” economist Larry Summers said Wednesday in an interview with Kate Bolduan on CNN News Central.

Trump’s floating plans to raise tariffs and implement mass deportations remain some of the biggest risks to inflation in the near term, along with volatility in the Middle East.

Despite these risks, the disinflation picture remains quite positive so far.

With underlying inflation holding steady and showing no signs of acceleration, that leaves the Federal Reserve on track to cut interest rates further in December, Lindsay Rosner, head of multi-sector fixed income investments at Goldman Sachs Asset Management, said in a statement.

Markets seemed to agree: Projections for a quarter point cut rose to 82% on Wednesday from 58.7%, according to the CME FedWatch Tool.

While the central bank has begun to loosen monetary policy from its restrictive vice grip over the past two and a half years, Fed Chairman Jerome Powell noted last week that “the job is not done on inflation.”