The latest Consumer Price Index (CPI) report delivered a welcome softening during October, coming in below consensus expectations. Headline inflation increased just 0.04% month-over- month, nearly a complete pause in aggregate price increases. On a year-over-year basis, inflation decelerated to 3.2% after being elevated by rising energy prices in August and September. Core inflation increased at a rate below expectations, increasing just 0.2% month- over-month or 4.0% year-over-year. Although the Federal Reserve (Fed) is likely to maintain its data-dependent approach, cooling inflation coupled with a softening jobs market further reduces the chances of a December rate hike.

Consumer Price Index
Year-over-year % change, 2010–present

Consumer Price Index core and headline inflation since 2010

Source: Bureau of Labor Statistics, Principal Asset Management. Data as of November 14, 2023.

  • A 2.5% month-over-month decrease in energy prices helped to slow headline inflation to nearly zero in October. Gasoline prices markedly declined by 5.0% on a month-over- month basis.
  • Food inflation increased 0.3% month-over-month in October, marking the highest rate of food price increases since February. On a year-over-year basis, food prices increased by 3.3%.
  • Core goods inflation has been below 2.1% on a year-over-year basis through 2023. However, core services inflation remains elevated at 5.5%, increasing 0.3% in October.
  • Shelter costs cooled in October, decreasing from 0.6% month-over-month in September to 0.3% in October. The “owners’ equivalent rent” and “lodging away from home” categories were responsible for much of this slowdown. In contrast, “rent of primary residence” price inflation remained strong at 0.5% month-over-month. Shelter inflation is still expected to continue slowing in the coming months.
  • “Supercore” inflation, or core inflation ex-shelter, increased only 0.1% in October, suggesting that the underlying inflation trends are moving in the right direction amid elevated interest rates. While today's report confirms that inflation is easing faster than expected, the path to a stable 2% inflation print will likely be long and arduous. Slow-moving shelter prices could keep inflation elevated, and food and energy can experience monthly price spikes.

While today's report is good news for the Federal Reserve (particularly Chair Powell) and makes a December hike unlikely, until inflation shows a convincing and clear downward trend, the Fed will likely struggle to mark the peak of its tightening cycle.


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