US inflation rose slightly last month but remained low after 2 years of steady cooling

WASHINGTON (AP) — U.S. inflation rose in October, driven by expensive rents, second-hand cars and plane tickets; This is a sign that price increases may stabilize after slowing in September Lowest tempo since 2021.

Consumer prices rose 2.6% from a year earlier, up from 2.4% in September, the Labor Department said Wednesday. This was the first increase in annual inflation in seven months. From September to October, prices increased by 0.2% compared to the previous month.

Excluding variable food and energy costs, “core” prices increased by 3.3% compared to the previous year, just as in September. From September to October, core prices rose 0.3% for the third consecutive month. In the long run, at this pace, core inflation will exceed the Federal Reserve’s 2% target.

But most economists think inflation will eventually continue to slow. Consumer inflation, which peaked at 9.1% in 2022, has fallen steadily since then, but overall prices are still around 20% higher than three years ago.

price increase Americans’ cooling off from the economy and spoke about the Biden-Harris administration’s economic stewardship, contributing to Vice President Kamala Harris’ loss in last week’s presidential election.

But Donald Trump’s victory has increased uncertainty about where inflation might go and how the Fed will respond if it accelerates again. Trump has promised to reduce inflation, mostly by increasing oil and gas drilling. However, mainstream economists have criticized some of his proposals, notably the plan to significantly increase customs duties on imports and mass deportation of immigrants. will worsen inflation if fully implemented.

Most of the increase in consumer prices from September to October reflects increases in rent and housing costs, a trend that Fed officials expect to abate in the coming months. As a result, Wednesday’s numbers could put the Fed on track to cut interest rates for a third time in December, as officials have done before. stated that they probably would.

“Inflation looks a little sticky, but it’s not a big problem,” said Ryan Sweet, chief U.S. economist at consultancy Oxford Economics. “I think what that means for the Fed is that they can still cut rates in December.”

Sweet said the Fed would cut interest rates by a full percentage point if it cuts interest rates again by an expected quarter point in December. He thinks policymakers will then pause to gauge the effects of interest rate cuts on the economy and inflation.

“A pause is coming,” Sweet said. “The path for interest rates next year is much darker.”

Stock prices rose after Trump’s election victory, mostly on optimism that the tax cuts and deregulation he proposed would boost the economy and corporate profits. But bond yields also rose, partly reflecting fears that inflation could accelerate.

Additionally, the economy is growing faster than many economists expected at the beginning of this year. expanded at an annual rate of approximately 3% Over the past six months, consumers, especially those with higher incomes, have been spending freely and fueling growth.

Gas prices fell 0.9% from September to October, helping keep overall inflation low. Pump prices have since fallen further on average across the country, falling to 3.08 per gallon on Wednesday, according to AAA. This is down from $3.20 a month ago.

Grocery prices increased by just 0.1% from September to October, and only 1.1% last year; This provided some relief to consumers after food costs rose nearly 23% in the past three years. Egg prices remain highly variable. They fell 6.4% last month, but are up more than 30% from a year ago.

Used car prices rose 2.7% from September to October alone, after being mostly down in the months before that. However, this rise may turn out to be an anomaly. Auto dealers have mostly rebuilt their inventory that was depleted during COVID, and in some cases dealers have had to re-offer incentives to entice buyers. Compared to a year ago, average used car prices are still down 3.4%.

Some consumers were relieved due to the slowdown in inflation. Lessie Owen, who works in sales, said she noticed the drop in gas prices, making it easier for her to pay on the way to work each day in Washington, D.C. He said that the prices of fruits and vegetables have increased in the markets. It appears to have stabilized.

Owen’s mortgage rate is still under 3 percent, which helps his finances, and he says he’s always been frugal.

“We take advantage of special deals, discounts and coupons – all of it,” he said.

On: a press conference Last week, Fed Chairman Jerome Powell expressed confidence that inflation was still moving toward the central bank’s 2% target, albeit perhaps slowly and unevenly.

Powell also noted that most sources of price pressure have begun to cool and inflation is unlikely to accelerate in the coming months. Wages are still rising and have been outpacing prices for the last year and a half. However, Powell stated that wages are not increasing fast enough to increase inflation.

The Fed chairman also observed that some sources of rising prices, such as auto insurance, reflect changes that have occurred during the pandemic, such as an increase in auto prices that make it more costly to insure. This situation, which is “catching up with inflation” as he puts it, is likely to decrease over time.

A survey released Tuesday by the Federal Reserve Bank of New York found that consumers expect prices to rise just 2.9% over the next 12 months; This was the lowest increase in nearly four years.

Low inflation expectations are important because when consumers expect milder price increases, they are less likely to act in ways that will increase inflation, such as accelerating their purchases or demanding higher wages to offset higher prices.

Another potential source of relief for Americans’ budgets is apartment rents. They’re currently barely rising on average nationwide, according to real estate brokerage Redfin. The median rent measure was $1,619, just 0.2% higher than October last year, but that figure only reflects rents for new leases.

The government’s measure of rents is rising faster because it includes existing rents. Many landlords are still increasing their monthly payments to reflect rising costs on new leases over the past three years.

Related Posts