US consumer inflation eased in October, driven lower by cheaper gas, cars and airfares

by Joshua Brown
US Inflation Trends

In October, consumer inflation in the United States showed signs of abating, likely influenced by the Federal Reserve’s interest rate increases. This trend was visible in lower costs for gas, vehicles, and air travel.

The latest data from the Labor Department indicated a widespread deceleration in price hikes for various items including gasoline, both new and used cars, hotel accommodations, and real estate. The overall inflation rate from September to October remained stable, marking a decline from the 0.4% rise in the previous month. Year-over-year, the consumer price index in October rose by 3.2%, a reduction from September’s 3.7% and representing the lowest annual increase since June.

Core inflation, which excludes the often fluctuating food and energy sectors, also showed a surprising slowdown. It registered a modest 0.2% increase from September to October, trailing the pace of the last two months. Core inflation is a key metric for economists, offering insights into the potential future trajectory of inflation. On an annual basis, core prices in October rose by 4%, a slight decrease from 4.1% in September.

The Federal Reserve, under the guidance of Chair Jerome Powell, is now contemplating whether the current benchmark interest rate is adequate to curb inflation, or if further increases are necessary. October’s lower-than-anticipated inflation figures might reduce the likelihood of another imminent rate hike.

Powell recently admitted uncertainty over whether the Fed’s rates are sufficiently high to control inflation. Since last year, the Fed has increased its benchmark rate 11 times, reaching approximately 5.4%, the highest in over two decades. However, there has been only one rate hike since May. Data post the Fed’s last meeting on November 1st revealed a slowdown in job growth in October.

The Fed’s rate hikes aim to temper growth and alleviate inflation pressures by raising borrowing costs for mortgages, car loans, credit cards, and business loans. The goal is a “soft landing,” balancing the reduction of inflation with avoiding a severe recession.

Inflation, which peaked at 9.1% in June 2022, the highest in 40 years, has declined to 3.7% as of September. The surge in prices began in 2021 when consumer spending increased post-pandemic, leading to greater demand and supply chain disruptions. Inflation has since moderated as supply chains stabilized and higher borrowing rates affected certain sectors, particularly housing.

Powell recently noted that further inflation reduction might require a decrease in consumer spending, alongside supply chain improvements, hinting at potential additional rate hikes.

Economists are closely monitoring various inflation indicators, including costs of rent, housing, health insurance, and services like dining, entertainment, and travel. A recent change in the government’s method for calculating health insurance costs is expected to result in higher reported inflation rates in future months.

Despite low unemployment and consistent job growth, the persistently high prices of daily necessities like groceries contribute to a pessimistic public perception of the economy. While the prices of many such items continue to rise, the rate of increase has slowed.

Frequently Asked Questions (FAQs) about US Inflation Trends

What caused the slowdown in US consumer inflation in October?

The slowdown in US consumer inflation in October was primarily due to the Federal Reserve’s interest rate hikes, which have been implemented to cool down the consumer price spikes. These measures led to reduced costs in various sectors, including gasoline, automobiles, and air travel.

How did core inflation change in October?

In October, core inflation, which excludes the more volatile food and energy prices, also showed an unexpected deceleration. It increased only by 0.2% from September to October, which is slightly below the pace of the previous two months. Year-over-year, core prices in October rose by 4%, a decrease from 4.1% in September.

What impact have the Federal Reserve’s rate hikes had on inflation and the economy?

The Federal Reserve’s rate hikes have been instrumental in reducing inflation from a peak of 9.1% in June 2022 to 3.7% in September. These hikes increased the costs of mortgages, auto loans, credit cards, and business borrowing, aiming to slow growth and cool inflation pressures without causing a deep recession.

How might October’s inflation figures affect the Federal Reserve’s future decisions?

The milder-than-expected inflation figures for October could influence the Federal Reserve to reconsider imposing another interest rate hike in the near future. The Fed, under Chair Jerome Powell, is assessing whether the current rates are sufficient to control inflation or if further hikes are needed.

Why is there still a negative public perception of the economy despite low unemployment?

Despite very low unemployment and steady hiring, the public perception of the economy remains negative mainly due to the high costs of everyday necessities like groceries, which have continued to rise, albeit at a slower pace than before. This continued price increase affects the daily lives of most Americans.

More about US Inflation Trends

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NewsJunkie23 November 14, 2023 - 4:56 pm

So, inflation ain’t that crazy now, thanks to Fed. Powell’s watchin’ it. Rates up, but maybe not more? People still worried ’bout their groceries.

FinanceGeek82 November 14, 2023 - 7:44 pm

Fed playin’ with rates like a DJ. Rates up, inflation down. Core prices bit lower, yep. Powell’s like, “IDK if it’s enuf.” People still grumpy ’bout prices, tho.

EconomyExplorer November 14, 2023 - 11:15 pm

Numbers showin’ some hope. Fed rates makin’ a diff. Powell’s talkin’ ’bout more rates? People feelin’ inflation pinch, still.

EconWatcher101 November 15, 2023 - 8:18 am

interesting read. Inflation’s down cuz Fed did rate hikes, duh. Gas, cars, and stuff cheaper now. powell ain’t sure ’bout rates tho. lotta numbers, makes my head spin.


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