By Justin Lahart
The Labor Department on Wednesday reported that consumer prices in October rose 2.6% from a year earlier. That marks a pickup in the pace of inflation from September, when prices were up 2.4% on the year.
Core prices, which exclude food and energy items in an effort to better reflect inflation's underlying trend, were up 3.3% from a year earlier.
Both results matched the expectations of economists polled by The Wall Street Journal.
The report is the first after an election that was characterized by Americans' frustration with inflation during President Biden's administration -- consumer prices are now about 20% higher than they were when he came into office. Absent that increase in prices, last week's outcome might have been different.
Even though inflation has been on a cooling trend, President-elect Trump will enter office at a delicate time for the economy, with the Federal Reserve aiming to lower interest rates, and ensure the continued health of the economy, without rekindling inflation.
The month-over-month price increase in overall prices was a seasonally adjusted 0.2%. Core prices were up 0.3% on the month.
Despite the firming in the inflation data, Fed policymakers at this point still appear on course to cut rates by another quarter percentage point when they hold their final meeting of the year next month.
This is first because, despite some bumps along the way, inflation still looks as if it is in a cooling trend. In October 2023, overall consumer prices were up 3.2% from a year earlier. In June 2022, prices were up 9.1% from a year earlier, marking the steepest inflation since the early 1980s.
Moreover, there is still a degree of "catch-up inflation" in the data. Rent-inflation measures lag behind what is happening with new leases, for example. Car insurers have to negotiate price increases with state regulators, so it takes a while for jumps in their costs to make their way into prices.
Fed officials also view the current level of short-term interest rates as restrictive, meaning that without more cuts the labor market could cool further than they like, and even put the economy at risk of recession.
That said, the Labor Department is set to release its next consumer-inflation report on Dec. 11, a week ahead of the Fed meeting. If it is much firmer than Fed officials would like, they might opt to put further rate cuts on temporary hold. That would especially be true if the November employment report, due out Dec. 6, shows that jobs bounced back, confirming that last month's slowdown was simply a reflection of hurricane and strike-related issues.
There is also the possibility that officials could cut in December and then signal that further interest-rate reductions will be moving to an every-other-meeting schedule. This would allow them to more carefully calibrate policy -- an attempt to ensure they don't take rates down too low, and then have to reverse course.
Write to Justin Lahart at Justin.Lahart@wsj.com
(END) Dow Jones Newswires
November 13, 2024 08:34 ET (13:34 GMT)
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