The Bureau of Labor Statistics reported Wednesday that inflation rose in October despite being largely in line with Wall Street expectations.
The Consumer Price Index, which measures costs across a range of goods and services, rose 0.2% during the month. This brings the 12-month inflation rate to 2.6%, up 0.2 percentage points from September.
The readings were in line with Dow Jones estimates.
With the exception of food and energy, this step was more pronounced. Core CPI accelerated 0.3% during the month and reached 3.3% annually, also in line with expectations.
Stock market futures rose after the release while Treasury yields fell.
Energy costs, which had been falling in recent months, stabilized in October while the food index rose 0.2%. On an annual basis, energy fell by 4.9% while food rose by 2.1%.
Despite signs of moderate inflation elsewhere, housing prices continued to be a major contributor to the CPI movement. The shelter index, which carries about a third of the weight of the broader index, rose another 0.4% in October, double its move in September and up 4.9% year-on-year. This category was responsible for more than half of the gains in the CPI measure of all items, according to the Bureau of Labor Statistics.
Used car costs were also up 2.7% month-on-month, while car insurance was down 0.1% but still 14% higher over the 12-month period. Airline ticket prices jumped 3.2% while egg prices fell 6.4% but are still 30.4% higher than last year.
The Bureau of Labor Statistics said in a separate report that average adjusted hourly wages for workers rose 0.1% during the month and 1.4% compared to last year.
The readings took inflation away from the Fed's 2% target and could complicate the central bank's monetary policy strategy going forward, especially with a new White House administration taking office in January.
“There are no surprises from the CPI, so for now the Fed should be on track to cut rates again in December,” Fed Chair Ellen Zentner said. “But next year is a different story, given the uncertainty.” “Uncertainty surrounding potential tariffs and other Trump administration policies.” Economic Strategist at Morgan Stanley Wealth Management. “Markets are already weighing the possibility that the Fed will cut rates in 2025 fewer times than previously thought, and that they may hit the pause button as early as January.”
President-elect Donald Trump's plans to implement more tariffs and government spending have the potential to boost growth and exacerbate inflation, which remains a major problem for American households despite retreating from its meteoric peak in mid-2022.
As a result, traders have in recent days reduced their expectations for future Fed rate cuts. The central bank has already cut 0.75 percentage points from its key borrowing rate and was expected to move aggressively forward.
However, traders now expect cuts of only another three-quarters of a point through the end of 2025, about half a point less than expected before the presidential election.
