In a positive turn for U.S. households and the Federal Reserve, consumer price inflation in the United States has eased, falling to 3.2% for the 12 months ending in October. This marks a decrease from the 3.7% recorded in September and represents the lowest annual rate since March 2021, according to data from the Bureau of Labor Statistics.
The moderation in consumer price inflation, lower than expected, brought notable gains in U.S. stock markets. The Dow rose over 500 points, or 1.5%, the S&P 500 gained 2%, heading for its best day since January, and the Nasdaq Composite added 2.3%, on track for its best day since April.
On a monthly basis, prices remained unchanged for the first time since July 2022, contrasting with the previous month’s 0.4% increase driven by elevated gas and rent costs. Economists had anticipated a 0.1% monthly increase and a 3.3% year-over-year gain.
The decline in energy prices in October was significant, offsetting the continued rise in shelter costs. Shelter prices, measuring rental leases and implicit rental value, increased by 0.3% for the month, down from the 0.6% spike in September.
Food prices experienced a slight acceleration in September, but annual inflation across grocery and restaurant categories decreased. Annual food inflation stood at 3.3%, the lowest since June 2021, while food at home dropped to 2.1%, also the lowest since June 2021, and food away from home fell to 5.4%, the lowest since November 2021.
Encouragingly, the underlying inflation, as measured by Core CPI, which excludes volatile food and energy categories, increased by 0.2% monthly, resulting in a 4% annual increase—the lowest yearly increase since September 2021. This moderation in both headline and core inflation is welcomed by the Federal Reserve amid its efforts to tighten monetary policy and address inflation concerns.
While acknowledging progress in slowing down inflation, economists caution that inflation remains elevated, emphasizing the need for ongoing monitoring and potential further measures to achieve the Federal Reserve’s target.