The US Bureau of Labor Statistics released a report on Wednesday, November 13, showing that the Consumer Price Index (CPI) rose by 2.6% year-on-year in October, an increase of 0.2 percentage points from September, but largely in line with expectations.
The data from the Bureau of Labor Statistics also indicated that the CPI increased by 0.2% on a month-on-month basis in October, meeting the expectations of Dow Jones.
Excluding the volatile food and energy sectors, the core CPI rose by 0.3% on a month-on-month basis in October and increased by 3.3% year-on-year, also in line with expectations.
The price of new cars in October showed no change from the previous month, but decreased by 1.3% year-on-year; while the costs of used cars and trucks rose by 2.7% on a month-on-month basis but fell by 3.4% year-on-year.
Energy costs, which have been decreasing in recent months, showed no change in October, with a year-on-year decline of 4.9%; the food index rose by 0.2% on a month-on-month basis and 2.1% year-on-year.
Costs in the service industry (excluding energy services) increased by 0.3% on a month-on-month basis and 4.8% year-on-year.
Despite the ongoing slowing of inflation, housing-related costs remain a concern. Housing costs account for a significant portion of the CPI weight (about one-third). Data from the Department of Labor showed that housing costs in October continued to be a major driver of inflation, increasing by 0.4% on a month-on-month basis and 4.9% year-on-year.
In comparison to the September data, the October figures further distance the US inflation from the 2% target set by the Federal Reserve, potentially complicating the central bank’s future monetary policy strategies.
Although the inflation data showed strength compared to September, analysts believe that the Federal Reserve policy makers will likely decide to cut interest rates by 25 basis points at the December meeting.
According to CNBC, Ellen Zentner, Chief Economist at Morgan Stanley Wealth Management, said, “The CPI data was not surprising, so it appears that the Fed should cut rates again in December. However, considering the uncertainty surrounding potential tariffs and other policies of the Trump administration, the situation next year will be different.”
“The market is already weighing a possibility that the Fed may cut rates less in 2025 than previously anticipated, and they may press the pause button as early as January next year,” Zentner added.