Inflation rose in October, although it was largely in line with Wall Street expectations, the Bureau of Labor Statistics reported Wednesday.
The consumer price index, which measures the cost of a range of goods and services, rose 0.2% for the month. The 12-month inflation rate rose by 0.2 percentage points to 2.6% compared to September.
The values were both in line with Dow Jones estimates.
Without food and energy, development was even more pronounced. Core CPI rose 0.3% for the month and was 3.3% annually, also in line with forecasts.
Stock market futures rose after the release while Treasury yields fell. Following the release, traders have significantly increased the likelihood that the Federal Reserve will cut its key interest rate by another quarter of a percentage point in December.
Energy costs, which have fallen in recent months, remained unchanged in October, while the food index rose 0.2%. Year-on-year, the energy sector fell 4.9%, while the food sector increased 2.1%.
Despite signs of easing inflation elsewhere, accommodation prices continued to make a significant contribution to CPI developments. The shelter index, which makes up about a third of the broader index, climbed another 0.4% in October, doubling its rise in September and gaining 4.9% on an annual basis. According to the BLS, this category accounted for more than half of the increase in the overall CPI measure.
Used car costs also rose 2.7% month-on-month, while car insurance fell 0.1% but was still 14% higher over the 12-month period. Airfares rose 3.2% while egg prices fell 6.4% but were still 30.4% higher than a year ago.
Inflation-adjusted average hourly wages for workers rose 0.1% for the month and 1.4% from a year ago, the BLS said in a separate report.
The readings pushed inflation further away from the Federal Reserve's 2 percent target and could complicate the central bank's future monetary policy strategy, particularly if a new administration takes over the White House in January.
“No CPI surprises, so for now the Fed should be on track to cut rates again in December. “Next year looks different, however, given uncertainty over possible tariffs and other actions by the Trump administration,” said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management. “Markets are already considering the possibility that the Fed will cut interest rates less frequently in 2025 than previously thought, and that it may hit the pause button as early as January.”
President-elect Donald Trump's plans to impose more tariffs and government spending have the potential to both boost growth and exacerbate inflation, which remains a significant problem for U.S. households even as it moderates from its meteoric peak in mid-2022.
As a result, traders have scaled back their expectations of impending Fed rate cuts in recent days. The central bank has already cut its key interest rate by 0.75 percentage points and was expected to take strong action.
However, by the end of 2025, traders only expect further cuts of three-quarters of a point, about half a point less than what was priced in before the presidential election.
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