October US inflation climbs 0.2%, as expected, driven by shelter
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The news: US consumer prices rose 0.2% in October, according to the Labor Department, in line with forecasts.
The context: The inflation data, combined with robust consumer spending and economic growth, suggests the Fed will likely remain cautious when deciding on the pace of future interest rate cuts.
That is especially so, as economists expect higher inflation if President-elect Donald Trump implements his economic agenda of sweeping tariffs on imports and tax cuts.
The numbers: Core CPI, excluding food and energy, increased by 0.3% for the third consecutive month, driven mainly by higher shelter costs, which drove over half of the monthly CPI increase.
Annually, the CPI advanced 2.6%, marking an increase from September's 2.4%, while core CPI rose 3.3% year-on-year.
Used car prices surged 2.7%, and airfare increased 3.2%. Energy prices remained steady, with electricity up 1.2% and gasoline down 0.9%.
Traders increased their expectations of a December rate cut to around 70%, up from about 60%.
What they said: Speaking to Bloomberg TV shortly after the release, Minneapolis Fed President Neel Kashkari said he is confident inflation is "headed in the right direction" based on the headline figures.
He made the remark emphasising he had not yet examined the data in detail.
“At least on the headline level it seems to be confirming the path that we’re on,” Kashkari said. “We’ve made a lot of progress in the last year bringing inflation down.”
“Housing inflation we know is a lagging indicator. We know that it takes a couple of years for the new leases to turn over. And the new leases are showing that we’re heading in the right direction. Right now, I think that inflation is heading in the right direction. I’ve got confidence about that, but we need to wait. We’ve got another month or 6 weeks of data to analyse before we make any decisions.”
The sources: US Bureau of Labor Statistics , Reuters , Bloomberg , WSJ
