US inflation rose 3.2% in October, slowing from the previous month for the first time since June as gasoline prices fell, although still uncomfortably above the Federal Reserve’s 2% target.
The Consumer Price Index, which tracks changes in the costs of everyday goods and services, is cooling from a 3.7% gain in September, according to Bureau of Labor Statistics data released Tuesday.
The October CPI is the most closely watched measure of inflation and will undoubtedly weigh heavily on the Federal Reserve’s decision to implement one more interest rate increase by the end of the year.
The headline inflation figure of 3.2% is slightly below the 3.3% figure economists were expecting, according to estimates from data set.
On a monthly basis, consumer prices were unchanged from last month at 0.4%, attributed to a 5% drop in the gasoline index.
The housing index rose 0.3%, the federal agency said, offsetting a drop in the gasoline index and accounting for most of the CPI’s gain.
Until Tuesday, a gallon of gasoline in the United States averaged $3.35, according to AAAbelow the average price of $3.65 per gallon when the September CPI report was released, and from $3.85 the previous month.
cThe mineral CPI, a figure that excludes volatile food and energy prices and serves as a widely followed indicator among policymakers to determine long-term trends, rose to 0.3% in October, an advance of the 4.0% compared to the previous year..
“October’s modest headline CPI gain is likely to be overshadowed by another firm reading in the core,” Wells Fargo wrote in a note ahead of the report.
“Lower inflation in the coming months does not necessarily mean a victory over inflation,” the bank said.
Although the October CPI report is trending positively toward the Fed’s 2% inflation target, it does not confirm whether the Fed is likely to push interest rates beyond their current range (between 5.25% and 5.5%) after its December monetary policy meeting, scheduled to take place from December 12 to 13.
Federal Reserve Chair Jerome Powell has kept the door open to another hike, reiterating during a hawkish speech at the International Monetary Fund’s policy panel in Washington, D.C., last week: “If it becomes appropriate to further tighten the policy, we will not hesitate to do so. .”
“We’ll keep it up until the job is done,” Powell added of the Federal Reserve’s 2% inflation target, which the U.S. economy hasn’t seen since 2012.
Meanwhile, the CME FedWatch Tool projects a more than 85% chance that the Federal Reserve will not raise rates again this year, compared to a 54% chance a month ago.
For months now, central bankers have considered an additional 25 basis point hike before the end of the year in hopes of an economic slowdown, and economists have been divided over what the Federal Reserve will do next.
Economists expected the Federal Reserve to lean toward another rate hike after a spectacular September jobs report that said the U.S. economy added 336,000 jobs during the month.
However, gains of 150,000 jobs in October showed that September’s job gain was only temporary.
