The U.S. Consumer Price Index (CPI) rose 3.2% in October from a year ago, according to data released by the Bureau of Labor Statistics on Tuesday. This was below expectations of 3.3%.
The CPI measures the change in prices paid by consumers for a basket of goods and services. The October reading was the lowest since September 2021.
Core CPI Slows to 4%
Excluding food and energy prices, the core CPI rose 4% in October from a year ago. This was also below expectations of 4.1%.
The core CPI is a measure of inflation that is less volatile than the headline CPI. It is closely watched by the Federal Reserve as it makes decisions about monetary policy.
Energy Prices Decline
Energy prices fell 2.5% in October from a month ago. This was the largest monthly decline since April 2020.
The decline in energy prices was driven by a drop in the price of gasoline, which fell 3.5% in October.
Food Prices Increase
Food prices rose 0.3% in October from a month ago. This was the smallest monthly increase since April 2022.
The rise in food prices was driven by higher prices for meat, poultry, fish, and eggs.
Implications for the Federal Reserve
The October CPI report is likely to be welcomed by the Federal Reserve. The lower-than-expected reading suggests that inflation may be peaking.
The Fed is expected to raise interest rates in December to combat inflation. However, the October CPI report could lead the Fed to be less aggressive in raising rates.
The October CPI report was a mixed bag. The headline CPI was below expectations, but the core CPI remained elevated.
The lower-than-expected headline CPI could lead the Fed to be less aggressive in raising interest rates. However, the elevated core CPI suggests that inflation remains a concern.