The numbers: The cost of living was unchanged in October as cheaper gas gas took the edge of inflation, pointing to incremental progress in the Federal Reserve’s effort to get prices under control.
It was the smallest increase in 15 months. Economists polled by the The Wall Street Journal had forecast a 0.1% advance in the consumer price index last month.
The rate of inflation over the past 12 months, meanwhile, slowed to a 3.2% from 3.7%.
If food and gas are set aside, so-called core consumer prices rose a somewhat sharper 0.2% in October. The Fed views the core rate as a better predictor of future inflation trends.
While the yearly increase fell a tick to 4% and touched the lowest level in two years, the core rate has been stuck near 4% for the past several months. That suggests some stickiness to inflation and leaves the increase in prices twice as high as the Fed’s 2% goal.
The soft inflation reading could help persuade the Fed to leave interest rates alone at its last meeting of the year in mid-December.
Still, the central bank wants to see a further easing in prices soon, especially the core rate, or it could increase borrowing costs again.
Big picture: Inflation is subsiding, but senior Fed officials remain wary.
Some say inflation is moving “sideways” and Chairman Jerome Powell himself said he’s on guard against “head fakes” that suggest the danger is past.
The Fed is likely to keep interest rates at current levels unless progress on inflation stalls.
Market reaction: the Dow Jones Industrial Average
DJIA
and S&P 500
SPX
were set to open sharply higher in Tuesday trades as investors reacted positively to the CPI report.
The yield on the 10-year Treasury note
BX:TMUBMUSD10Y
sank to 4.48%.
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