Underlying inflation appeared to have peaked

United States consumer prices increased less than expected in October rising by 0.4 per cent in October, after climbing by the same margin in September.

Economists polled by Reuters had forecast that the Consumer Price Index (CPI), which measure a country’s inflation, would advance by 0.6 per cent. In the 12 months through October, the CPI increased 7.7 per cent after rising 8.2 per cent on the same basis in September.

Even with the slowdown in the inflation rate, it still remains well above the Fed’s two per cent target. Nevertheless, it was the first time since February that the annual increase in the CPI was below eight per cent. The annual CPI peaked at 9.1 per cent in June, which was the biggest advance since November 1981.

It is believed that the underlying inflation in the US appeared to have peaked, which would allow the Federal Reserve to dial back its hefty interest rate hikes. Although gasoline prices increased after three straight monthly declines, goods inflation is slowing, as demand rotates back to labour intensive services and fractured global supply chains recover.

Discounts driving price inflation slow down

Retailers are also sitting on excess merchandise, forcing them to offer discounts to clear shelves to make way for Christmas supplies. However, the cost of living remains high.

Shelter costs, which make up about one-third of the CPI, rose 0.8 per cent for the month, the largest monthly gain since 1990, and up 6.9 per cent from a year ago, their highest annual level since 1982. Also, fuel oil prices exploded 19.8 per cent higher for the month and are up 68.5 per cent on a 12-month basis.

The food index rose 0.6 per cent for the month and 10.9 per cent annually, while energy was up 1.8 per cent and 17.6 per cent, respectively.