New inflation data showed consumer prices rose in October as forecast, keeping the Federal Reserve on track to cut rates again in December.
The latest data from the Bureau of Labor Statistics released Wednesday morning shows that the Consumer Price Index (CPI) rose 2.6% in October from the previous year, up slightly from the annual price increase of 2. 4% in September. The annual increase was in line with economists’ expectations.
The index rose 0.2% last month, matching September’s increase and also in line with economists’ estimates.
On a core basis, which excludes the more volatile costs of food and gas, prices rose 0.3% in October from the previous month, similar to September, and 3.3% from compared to last year for the third month in a row.
“There is progress on inflation,” Claudia Sahm, chief economist at New Century Advisors, told Yahoo Finance after the data was released. “We’ve been headed in the right direction, but it’s been a slow grind. And this is another month that fits into that slow grind.”
Although inflation is slowing, it remains above the Federal Reserve’s 2% annualized target. Over the past three and six months, the picture for the central bank has become even more unclear.
For the month of October, the three-month annualized core CPI rose to 3.6%, up from the previous 3.1%. The six-month annualized interest rate remained stable at 3.3%.
The outlook for inflation remains uncertain as economists warn of another potential inflation revival following the election of Donald Trump as the country’s next president.
Compared to the current Biden administration, Trump and his proposed policies are seen as potentially more inflationary due to the president-elect’s campaign promises of high tariffs on imported goods, tax cuts for businesses and curbs on immigration.
At a press conference after the latest rate cut, Federal Reserve Chairman Jerome Powell said the central bank does not and will not make decisions based on expected policy changes from a new administration.
“In the short term, the elections will have no effect on our policy decisions,” he said at the time. “We do not know what the timing and content of any policy changes will be. We therefore do not know what the effects on the economy would be, in particular whether and to what extent that policy would be important for achieving our objectives. target variables: maximum employment and price stability.”
Immediately after the data release, markets continued to price in another 25 basis point cut in December, although the likelihood that investors would expect central bank interest rates rose to more than 40% from around 30% a week ago, according to the CME FedWatch Tool. .
