US inflation rose 3.2% in October — decelerating from the previous month for the first time since June as gasoline prices eased, 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 a cooldown from the 3.7% advance in September, according to data by the Bureau of Labor Statistics released Tuesday.
October’s CPI is the most closely-watched measure of inflation that will no doubt weigh heavy on the Fed’s decision to implement one more interest rate hike by year’s end.
The 3.2% headline inflation figure is slightly below the 3.3% figure economists expected, according to estimates from FactSet.
On a monthly basis, consumer prices remained unchanged from last month, at 0.4%, attributed to a 5% decline in the gasoline index.
The shelter index rose 0.3%, the federal agency said, offsetting a decline in the gasoline index and accounting for the majority of the CPI’s advance.
As of Tuesday, a gallon of gas in the US averages $3.35, according to AAA, down from the $3.65 average price per gallon when September’s CPI report was released, and the $3.85 the month prior.
Core CPI — a number that excludes volatile food and energy prices and serves as a closely watched gauge among policymakers for long-term trends — increased to 0.3% in October, a 4.0% advance from a year ago.
“Subdued increase in October’s headline CPI is likely to be overshadowed by another firm reading in the core,” Wells Fargo wrote in a note ahead of the report.
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“Slower inflation in the months to come does not necessarily mean victory on inflation,” the bank said.
Though October’s CPI report trends positively towards the Fed’s 2% inflation target, it doesn’t confirm whether or not the Fed is likely to push interest rates beyond their current range — between 5.25% and 5.5% — following their December policy meeting, set to take place Dec. 12 to Dec. 13.
Fed Chair Jerome Powell has kept the door open for another hike, reiterating during a hawkish speech at the International Monetary Fund’s policy panel in Washington, DC, last week: “If it becomes appropriate to tighten policy further, we will not hesitate to do so.”
“We will keep at it until the job is done,” Powell added of the Fed’s 2% inflation goal, which the US economy hasn’t seen since 2012.
Meanwhile, the CME FedWatch Tool projects a more than than 85% chance that the Fed doesn’t raise rates again this year — up from a 54% chance a month ago.
For months now central bankers have mulled one addition 25 basis point-hike before year’s end in hopes of an economic slowdown, and economists have been divided on what the Fed’s next move is.
Economists expected that the Fed was leaning towards another rate hike after a blowout September jobs report that said the US economy added 336,000 jobs during the month.
However, October’s 150,000 payroll gains showed that September’s surge in jobs was only temporary.
