On Wednesday, the Consumer Price Index reported an increase of 2.6% compared to a year ago, surpassing September’s 2.4%. The graph depicts the historic inflation trend since 1970, and the chart details sector-specific inflation for October 2024, measuring 3.75 x 6.5 — cat=f
By JEANNA SMIALEK
In October, inflation experienced a slight uptick year-over-year, suggesting that while costs are being managed, they are not yet fully under control.
The consumer price index released earlier this week showed a rise of 2.6% from last year, which is higher than September’s figure of 2.4%. When food and energy prices were excluded to provide a clearer indication of the core inflation trend, it remained unchanged at 3.3%.
Monthly figures for both overall and core prices increased at a moderate rate, consistent with the rise observed from August to September. These inflation statistics met economists’ predictions.
For the Federal Reserve, this report is a reminder that inflation, while significantly reduced from last year’s peak of 9.1%, is not yet completely eradicated. Market participants anticipate that the central bank will implement a third and final interest rate cut this year at their gathering in mid-December, though any decision will depend on forthcoming economic data.
Michael Feroli, chief U.S. economist at J.P. Morgan, remarked on the inflation report, stating, “It could have been better, it could have been worse.” He speculated that the anticipated rate reduction in December is “likely to proceed, pending November’s jobs data and to a lesser extent, the November CPI.”
For consumers, the inflation report released on Wednesday serves as a reminder that prices for various goods and services — including restaurant meals and rent — are rising at a slower pace.
Nevertheless, prices continue to climb, albeit at a diminished rate, and current price levels are significantly above those from a few years ago. This situation has many consumers feeling as though they are still struggling to catch up.
Voter dissatisfaction regarding inflation was evident in last week’s elections, resulting in the removal of Democrats and the election of Donald Trump as President. Both survey results and exit polls indicated that the economy and inflation were key concerns for voters heading into the election.
Despite the gradual progress on inflation, it remains a work in progress.
Wall Street economists and Fed officials anticipate ongoing cooling of inflation toward normal levels in the coming months and years. This expectation has driven the Fed to lower interest rates, which had seen significant increases in 2022 and 2023 to slow down the economy and bring price rises under control.
However, completely controlling inflation has always been expected to be a challenging journey, as highlighted by Wednesday’s inflation report.
Omair Sharif, founder of Inflation Insights, remarked, “We’re sort of moving sideways,” noting that the latest figures are likely to keep Federal Reserve officials vigilant.
He emphasized that while inflation aligned with forecasters’ expectations, this was partly due to a significant drop in clothing prices — likely a temporary situation. Increases in service costs appear to be more persistent and typically adjust more slowly.
Due to these factors, the Fed is expected to maintain its vigilance as it approaches its final meeting of the year and looks into 2025. Officials are anticipated to lower borrowing costs by a quarter point in December, from the current range of 4.5% to 4.75%, but officials have explicitly stated that a decision is not assured.
“The real question is — what will December bring?” Fed Chair Jerome Powell said at a press conference last week. “By December, we’ll have more data.”
Sharif indicated that officials will likely monitor their preferred inflation measure, the personal consumption expenditures index set for release on Nov. 27, in determining their next steps.
“I don’t think today takes December off the table,” he noted regarding Wednesday’s report. However, he cautioned, “I don’t think we’re entirely out of the woods.”
In the long term, Trump’s election could influence the economic outlook, the trajectory of inflation, and ultimately, interest rate policies.
Fed officials have clearly stated that it is premature to speculate on how Trump’s agenda might impact the economy. However, many analysts have warned that some of his proposals, including significantly higher tariffs, could contribute to further inflationary pressures.
The president-elect himself has vowed to combat inflation, labeling it a “country buster,” but analysts remain doubtful.
As the plans of the incoming administration become clearer, the Fed may eventually need to take them into consideration.
“There’s nothing to model right now,” Powell stated last week. “It’s still very much in the early stages.”
