US consumer prices rise as expected in October
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The annual increase in inflation has slowed considerably from a peak of 9.1 per cent in June 2022, but remains above the Fed’s 2 per cent target.
PHOTO: AFP
WASHINGTON - US consumer prices increased as expected in October, and progress towards low inflation has slowed since the middle of the year, which could result in fewer interest rate cuts from the Federal Reserve in 2025.
The consumer price index (CPI) rose 0.2 per cent for the fourth straight month, the Labour Department’s Bureau of Labour Statistics said on Nov 13. In the 12 months through October, the CPI advanced 2.6 per cent after climbing 2.4 per cent in September.
Economists polled by Reuters had forecast the CPI gaining 0.2 per cent and increasing 2.6 per cent year on year.
The up-tick in annual inflation also reflects 2023’s low reading dropping out of the calculation.
Frustration over inflation helped to propel Republican Donald Trump to victory in last week’s presidential election, defeating Democratic Party candidate and Vice-President Kamala Harris.
Economists are, however, forecasting higher inflation in 2025 if Trump forges ahead with his economic policies, including tax cuts and higher tariffs on imported goods. He has also vowed to order mass deportations of undocumented immigrants, which economists say will shrink labour supply, raising costs for businesses that are then passed on to consumers.
Though the US central bank is expected to cut interest rates again in December, economists see the scope for more cuts in 2025 as limited.
US Treasury yields have surged as investors expect the President-elect’s policies to proceed unhindered, with Republicans controlling the US Senate and on the verge of clinching the House of Representatives.
The annual increase in inflation has slowed considerably from a peak of 9.1 per cent in June 2022, but remains above the Fed’s 2 per cent target. The central bank last week cut its benchmark overnight interest rate by 25 basis points to the 4.5 per cent to 4.75 per cent range.
The Fed launched its policy easing cycle with an unusually large half-percentage-point rate cut in September, the first reduction in borrowing costs since 2020. It hiked rates by 525 basis points in 2022 and 2023 to tame inflation.
Excluding the volatile food and energy components, the CPI increased 0.3 per cent in October, rising by the same margin for the third consecutive month. In the 12 months through October, the so-called core CPI gained 3.3 per cent. That followed a similar advance in September.
Early on Nov 13, financial markets saw a roughly 58.7 per cent probability of a 25 basis points rate cut at the Fed’s Dec 17 to 18 policy meeting, according to CME Group’s FedWatch Tool. The odds of rates being unchanged were at about 41.3 per cent. REUTERS
