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Consumer prices rose more in October, although overall inflation remained unchanged from the previous month and underlying inflation excluding food and gasoline slowed.

The consumer price index from the Labor Department increased by 0.4 percent from the previous month. The CPI is up 7.7 percent over the previous year.

Core consumer prices, a fundamental measure of inflation that excludes energy and food, increased 0.3 percent in October and are up 6.3 percent year over year.

CPI was predicted to grow by 0.7 percent month over month, according to economists. Prices were predicted to rise 7.9 percent over the previous year. Core prices were expected to rise 0.5 percent month on month and 6.6 percent year on year.

After the October inflation statistics were revealed, stock futures soared. Prior to the publication, futures indicated that the Dow Jones Industrial Average would gain by roughly 50 points. Following the revelation, futures projected that the Dow would rise over 800 points.

Inflation fell drastically in July, with the CPI remaining constant from June, the lowest increase since 2020. Many said that inflation had peaked, raising optimism that the steep price hikes that had plagued the economy since last year were in the rearview mirror. However, inflation surged in August and September, crushing such hopes. In September, the CPI rose 0.4 percent for the month and 8.2 percent year over year.

Core prices increased 0.6 percent from August to September, and 6.6 percent year over year. As a result, the rate of core inflation slowed in October.

The rate of food inflation has also eased. The index of food for domestic use increased 0.4 percent in October and is up 12.4 percent over the past year. For the third month in a row, the index monitoring the cost of eating out increased by 0.9 percent. Food prices away from home are up 8.6 percent from a year ago.

The index for shelter increased by 0.8 percent over the previous month, accounting for more over half of the overall index’s monthly gain. The energy index grew 1.8 percent throughout the month, with the gasoline and electricity indexes rising while the natural gas index fell.

Used automobile prices declined 2.4 percent, marking the fourth month of declines. Used automobile costs are up 2% over the previous year. New automobile costs increased 0.4 percent and are up 8.4 percent from a year earlier.

Clothing prices declined 0.7 percent, following a 0.3 percent drop in September. Clothing costs are up 4.1 percent from a year ago.

Prices in the services industry, excluding energy, increased 0.5 percent and are up 6.7 percent over the past year.

Since March, Federal Reserve policymakers have been boosting interest rates, including four consecutive increases of an unusually hefty 75 basis points. The Fed’s target rate has risen from near zero to slightly around four percent as a result.

Prior to the release of the CPI, the Fed Funds futures market revealed that investors were almost evenly divided on whether the Fed would announce a smaller increase of 50 basis points at the Dec. meeting or maintain the pace with another 75 basis point increase, with each having a roughly 50 percent chance of occurring. Following the announcement of the CPI, the odds swung dramatically in favor of the lesser increase.

Author: Scott Dowdy

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