New figures give Fed food for thought
US inflation ticked upwards in October, although likely not by enough to take a December interest rate cut by the Federal Reserve off the table.
Labor Department figures released Wednesday showed the consumer price index (CPI) increased to 2.6% last month, up from 2.4% in September, thanks in large part to a jump in housing and food costs.
The so-called core CPI – which excludes food and energy prices – was 0.3% higher month over month, and posted a 3.3% yearly gain, as progress on the Fed’s inflation battle stalled slightly.
Still, the slight increase came as little surprise to markets or economists, and does little to alter the prospect of another central bank rate cut next month.
First American senior economist Sam Williamson noted that headline and core CPI both fell in line with forecasts – “potentially supporting an additional 25-basis-point federal funds rate cut in December, barring any upside surprises in November payrolls data.”
Still, he underlined shelter as a “significant hurdle” in the Fed’s bid to continue bringing inflation towards its 2% target, accounting for more than half of the monthly overall increase. “Although shelter inflation continues to decline and is at its lowest level since May 2022, the pace of decline has slowed in recent months,” Williamson said, “limiting the potential decrease in headline and core CPI in the months ahead.”
The Fed began cutting interest rates with a bumper 50-basis-point reduction in September, its first cut for over four years, amid signs of progress on the inflation front.
Its final rate decision of the year – scheduled for December 17-18 – will be its last rate announcement before the inauguration of Donald Trump as president on January 20.
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