WASHINGTON, D.C.: In October, U.S. inflation rose slightly, mainly due to increases in rents, used car prices, and airfare, signaling that the steady cooling of price increases may be leveling off.
According to the Labor Department, consumer prices were 2.6 percent higher compared to the same period last year, up from a 2.4 percent increase in September. This marks the first annual rise in inflation in seven months. Month-to-month, prices rose by 0.2 percent from September to October, mirroring the previous month.
Core inflation, which excludes volatile food and energy prices, rose 3.3 percent over the past year and remained stable from September.
Core prices climbed 0.3 percent for the third consecutive month, a pace that would exceed the Federal Reserve’s 2 percent target if sustained long term. Despite this uptick, economists believe inflation is likely to resume its gradual slowdown.
Consumer inflation, which peaked at 9.1 percent in 2022, has significantly declined, though overall prices remain around 20 percent higher than three years ago.
The recent inflation surge, driven partly by the Russian invasion of Ukraine and supply chain disruptions, has impacted public perception of the economy and contributed to Vice President Kamala Harris’s recent election loss to Donald Trump.
Trump’s win has introduced some uncertainty into the inflation outlook. He has pledged to reduce inflation through increased oil and gas production but has also proposed policies, such as high tariffs on imports and mass deportations, that some economists warn could worsen inflation if fully implemented.
Rising housing costs were the largest contributor to inflation between September and October. However, Federal Reserve officials anticipate that these pressures will ease soon.
This latest data may support the Fed’s plan to reduce its key interest rate for a third time in December, following two earlier cuts. Ryan Sweet, Chief U.S. Economist at Oxford Economics, noted that inflation remains “a little sticky but not a big issue,” suggesting the Fed may feel comfortable reducing rates again in December.
Fuel prices provided some relief, dropping 0.9 percent from September to October. This decline, coupled with a current national average of $3.08 per gallon, has eased some consumer concerns about pump costs.
Grocery prices increased slightly by 0.1 percent over the month and are up just 1.1 percent over the past year, following a period of sharp increases during the pandemic. While used car prices rose by 2.7 percent in October, this spike is likely temporary as dealer inventories recover.
Fed Chair Jerome Powell remains cautiously optimistic, noting that inflation appears on a downward trajectory, albeit slowly. Recent surveys indicate consumers expect inflation to rise by only 2.9 percent over the next year, the lowest rate in four years.
Lower inflation expectations help ease pressure on prices, as consumers are less likely to accelerate purchases or demand higher wages in response to expected price increases.
Apartment rents have also stabilized, with Redfin reporting only a 0.2% annual increase in new leases in October. This suggests an easing in housing costs that could further support inflation’s gradual decline.
