The rate of inflation likely eased in October due to lower gas prices, but probably not enough to erase lingering worries at the Federal Reserve.
The consumer price index, the nation’s main inflation gauge, is forecast to show a small 0.1% increase last month, Wall Street
DJIA
forecasts show. The CPI rose 0.4% in September.
A spurt in gas prices in September has unwound over the past month.
The Fed is more fixated on the core rate of inflation, however, and it’s unlikely to show as much progress. The core CPI is forecast to rise 0.3%, a tick or two higher than the central bank would like.
Part of the reason is a supposed increase in medical costs, but prices aren’t really rising any faster. The Bureau of Labor Statistics is changing how it calculates medical costs and that will probably explain most or all of the increase.
In any case, the core rate omits food and energy and is viewed as a better predictor of future inflation trends.
Over the past year, the core rate has risen 4.1% and is expected to hold steady in October. The rate of inflation is still well above the Fed’s 2% target.
The overall CPI index has risen 3.7% in the past 12 months, a number that is likely to decline in October.
Fed officials voted early in the month to keep interest rates unchanged, but they want to see further declines in the rate of inflation before they decide to end the current cycle of rate increases.
“We know that ongoing progress toward our 2% goal is not assured: Inflation has given us a few head fakes,” Fed Chairman Jerome Powell said at a conference last week held by the International Monetary Fund.
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