The Bureau of Labor Statistics reported Wednesday that inflation accelerated in October, roughly in line with Wall Street expectations.
The consumer price index, which measures the cost of various goods and services, rose 0.2% over the month. This brought the 12-month inflation rate to 2.6%, an increase of 0.2 percentage point from September.
Both measurements were in line with Dow Jones forecasts.
Excluding food and energy, the movement was even more pronounced. Core CPI rose 0.3% in the month, reaching an annualized rate of 3.3%, also meeting expectations.
Stock market futures rose slightly following the announcement, but U.S. Treasury yields fell. The announcement led traders to sharply increase the likelihood that the Federal Reserve would cut its key interest rate by another quarter of a percentage point in December.
Energy costs, which had been falling in recent months, were flat in October, but the food index rose 0.2%. Compared to the same period last year, energy decreased by 4.9%, while food increased by 2.1%.
Despite signs of slowing inflation in other regions, shelter prices continued to be a significant contributor to CPI increases. The shelter index, which makes up about a third of the broader index, rose another 0.4% in October, twice as much as in September, and up 4.9% on an annual basis. According to the BLS, this category accounted for more than half of the increase in all item CPI measurements.
Used car prices also rose, rising 2.7% month-on-month. Meanwhile, auto insurance fell by 0.1% but was still up 14% over the 12-month period. Airfares rose 3.2% and eggs fell 6.4%, but were still 30.4% higher than last year.
In a separate report, the BLS said average hourly wages for workers, adjusted for inflation, rose 0.1% in the month and 1.4% from a year earlier.
The statistics move inflation further away from the Federal Reserve’s 2% target and could complicate the central bank’s future monetary policy strategy, especially with a new administration in the White House in January. be.
“There are no surprises in the Consumer Price Index (CPI), so the Fed should currently be on track to cut rates again in December,” said Chief of Staff Ellen Zentner. “Next year is a different story given the uncertainty surrounding the Trump administration’s policies.” Economic Strategist at Morgan Stanley Wealth Management. “Markets are already considering the possibility that the Fed will cut rates fewer times than previously thought in 2025 and could hit the pause button as early as January.”
President-elect Donald Trump’s plans for additional tariffs and government spending have the potential to both boost growth and worsen inflation, and even though the sharp peak in mid-2022 has eased, the U.S. This has become a serious problem for household finances.
As a result, traders in recent days have dialed back hopes for future Fed rate cuts. The central bank had already cut its key borrowing rate by 0.75 percentage points and was expected to raise rates aggressively.
However, traders now expect rates to fall by just three-quarters of a percentage point further by the end of 2025, about half a percentage point below what was priced in before the presidential election.
