United States: Inflation edges up in October but core inflation cools
Consumer prices rose 0.4% month-on-month in October, up from a flat reading in September and a notch above market expectations. A sharp rise in energy costs—due to a rebound in gasoline prices—and a surge in medical care costs to a three-year high largely drove the print, although price gains were made across a wide range of categories. Conversely, the increase in shelter prices, which account for a third of the index, was relatively subdued in October. Core consumer prices—which exclude volatile items such as food and energy—rose 0.2% in October, after September’s 0.1% increase.
Inflation ticked up to 1.8% in October from 1.7% in September, overshooting market expectations of a stable print. On the other hand, core inflation slowed to 2.3% from 2.4% in September. The core PCE price index—an indicator closely followed by the Fed—inched down to 1.7% in September (August: 1.8%), the latest month for which data is available, and thus continued to track below the Fed’s 2.0% target.
Commenting on the results, Leslie Preston, senior economist at TD Economics, noted:
“In general, all seems quiet on the inflation front. […]. This well-behaved pattern is expected to continue in the coming quarters. This will provide ample justification for the Fed to take a prolonged pause on interest rates, as it assesses the impact of this year’s rate cuts on the economy, whether global demand is showing signs of improvement, and how China-U.S. trade relations unfold.”