The US inflation rate saw a slight uptick in October, according to data from the Labor Department, which is expected to be closely reviewed by the Federal Reserve ahead of its policy meeting next month.
The Consumer Price Index (CPI), a key measure of inflation in the US economy, increased by 2.6% over the past year as of October, compared to a 2.4% rise in September. On a monthly basis, the CPI rose by 0.2%, mirroring the pace observed in September.
The “core” inflation rate, which excludes the more volatile categories of food and energy, went up by 3.3% year over year and 0.3% monthly, consistent with September’s figures.
All figures aligned with economist predictions, with Kathy Jones, Chief Fixed Income Strategist at Charles Schwab, noting the report contained “no surprises.”
Federal Reserve officials are expected to keep a close eye on these inflation metrics as they determine the direction of interest rates for the coming year. According to the CME Group’s FedWatch Tool, traders currently estimate a 69% likelihood that the Fed may introduce a quarter point rate cut in December, following the CPI report released Wednesday.
Last week, the Federal Reserve reduced its benchmark interest rate by 0.25 percentage points, bringing it to a range of 4.50% to 4.75%. The Fed emphasized that inflation, while slightly elevated, appeared balanced with the goal of maintaining stable prices and a strong labor market.
Federal Reserve Chair Jerome Powell indicated that officials would continue to carefully evaluate conditions before any further rate adjustments, aiming to reach a “neutral” rate that neither stimulates nor constrains economic growth.
Speculation is building on how the Fed might adjust its strategy in response to economic policies proposed by President elect Donald Trump, such as potential tax cuts and regulatory adjustments, which have recently spurred a stock market rally. However, some economists warn that these policies could add inflationary pressure, potentially leading the Fed to adjust rates more cautiously.
Richmond Federal Reserve President Thomas Barkin reiterated on Tuesday that the Fed remains prepared to act should inflation pressures start to rise again.
