The U.S. Bureau of Labor Statistics reported Wednesday that inflation picked up in October but was broadly in line with Wall Street expectations.
this consumer price indexThe measure, which measures the cost of a range of goods and services, rose 0.2% for the month. This brought the 12-month inflation rate to 2.6%, up 0.2 percentage points from September.
These readings were in line with Dow Jones estimates.
Excluding food and energy, the change is even more pronounced. Core CPI rose 0.3% this month, an annual increase of 3.3%, also in line with expectations.
Stock futures edged higher after the news, while Treasury yields fell.
Energy costs, which have been falling in recent months, were flat in October, while the food index rose 0.2%. Compared with the same period last year, energy fell 4.9%, while food rose 2.1%.
While signs of inflation elsewhere have eased, housing prices remain a major contributor to consumer price index movements. The housing index, which accounts for about a third of the broader index’s weighting, rose another 0.4% in October, double September’s gain and for an annual rate of 4.9%. The category accounts for more than half of the increase in the Consumer Price Index (CPI) for all goods, according to the Bureau of Labor Statistics.
The cost of used cars has also increased, rising 2.7% for the month, while motor vehicle insurance fell 0.1% but was still up 14% over the 12-month period. Air ticket prices rose 3.2% and egg prices fell 6.4%, but were still 30.4% higher than a year ago.
adjusted for inflation average hourly earnings The U.S. Bureau of Labor Statistics said in a separate report that workers’ wages increased by 0.1% that month, an increase of 1.4% from the same period last year.
The data push inflation further away from the Fed’s 2% target and could complicate the central bank’s future monetary policy strategy, especially if a new administration takes over the White House in January.
“CPI will not surprise, so for now the Fed should cut interest rates again in December. However, next year will be different given the uncertainty about potential tariffs and other Trump administration policies.” Morgan Stanley Wealth Management Economic strategist. “Markets are already weighing the possibility that the Fed will cut interest rates less than previously expected in 2025 and could hit the pause button as early as January.”
President-elect Donald TrumpThe U.S.’s plan for more tariffs and government spending threatens to both boost economic growth and fuel inflation, which remains a significant problem for U.S. households, although it has eased from its peak in mid-2022.
As a result, traders have lowered their expectations for future rate cuts from the Fed in recent days. The central bank has already lowered its main borrowing rate by 0.75 percentage points and is expected to cut interest rates significantly.
However, traders now expect production cuts to be only three-quarters deep by the end of 2025, about half a percentage point below pricing before the presidential election.
