US headline CPI inflation came in at an annual 2.6% in October, which was in line with consensus expectations. That rate was up from 2.4% in September but less than a third of the cyclical peak of 9.1% in June 2022. On a monthly basis, headline CPI rose 0.2% in August, versus 0.2% in September.
The core rate of inflation, which excludes foods and energy, was 3.3% (consensus: 3.3%), versus 3.3% in September. On a monthly basis, core CPI rose 0.3% in September, versus a 0.3% gain in September.
Nathaniel Casey, Investment Strategist at wealth management firm Evelyn Partners, comments:
Today’s inflation data came in line with market expectations, with a 0.2% monthly print. The annual headline rate accelerated slightly to 2.6% but this was largely due to a more favourable print from October last year falling out of the annual comparison and shouldn’t be of too much concern. Core inflation has stubbornly remained anchored around 3.3% for the last five prints now, with shelter (which makes up a large chunk of the index) continuing to remain elevated.
Used car prices added some pressure today, with prices in this segment rising by 2.7% for the month of October. However, the basket for apparel fell by 1.5% over the month, in aggregate this was enough to bring the overall category of core goods to a neutral 0% change for the month and remains in deflationary territory on an annual basis.
Energy continued to be a source of good news this month with energy commodity prices down 1% for the month thanks to weaker crude prices. However, this was offset by energy services which produced a strong print for the month. Food inflation decelerated slightly after a warmer print for the category in September with the annual inflation rate now sitting back at 2.1%.
US 10-year Treasury yields ticked down slightly following the CPI data (yields move inversely to prices) while US equity future edged slightly higher.
Overall, this inflation print is unlikely to derail the Fed’s rate-cutting cycle and we continue to expect the Fed to cut rates by 25 basis points at their final 2024 meeting next month. However, we remain vigilant of any further deviations in the inflation trajectory, given the resilience of the US economy and the potentially expansive fiscal policy that could accompany the Trump Presidency in January.
