U.S. annual inflation rate jumped to 2.6 percent in October, compared with 2.4 percent in September on a seasonally adjusted basis, the Bureau of Labor Statistics said Wednesday. That matched Wall Street’s expectations. The core Consumer Price Index-including food and energy-excepted to rise 0.3 percent for the month. Meanwhile, the overall CPI is a gauge that adjusts for a wide range of goods and services. It is one that registered an uptick of 0.2%. As such, the core CPI increased by 3.3% over last year.
While much of the inflation was flatted in many categories, shelter costs continued to play an important role in the CPI increase. The shelter index, which accounts for a third of the overall CPI, rose 0.4% in October, more than twice the 0.2% gain from September and has now risen 4.9% year-over-year. Shelter costs accounted for more than half the gains in the month for the overall CPI.
Used car prices went up by 2.7 percent, while fares for air travel climbed 3.2 percent. In contrast, food prices increased by a modest 0.2% in April, while energy prices remained unchanged for the month, although they declined by 4.9% on a year-over-year basis. The report also indicated that inflation-adjusted average hourly earnings rose by 0.1% in October, marking a 1.4% increase compared to the same month last year, which suggests a slight gain in purchasing power. However, inflation continues to exceed the Federal Reserve’s 2% target. The data appeared to support market optimism, with stock futures advancing and Treasury yields declining.
Traders increased their bets that the Federal Reserve will cut the federal funds rate another quarter of a percentage point in December, adding to previous reductions intended to retard inflation. Yet with inflation persistent, particularly in housing and other necessities, the Fed’s future decisions will depend in part on what happens at home, as well as on Washington come January.
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