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

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

More about US Inflation Trends

• Labor Department Report on US Inflation
• Federal Reserve’s Interest Rate History
• Federal Reserve Chair Jerome Powell’s Statements
• US Inflation Trends and Analysis