October US consumer prices rise as expected; shelter costs lead gains

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Written on Nov 13, 2024

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October inflation rate increases to 2.6%, up from 2.4%, the the first rise in inflation in seven months.
Energy costs, especially gasoline, show smaller declines than expected.
Shelter costs steady at 4.9%, while food and transportation inflation decrease slightly.

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US consumer prices rose in October as expected, driven by higher shelter costs, including rents, indicating that the path toward lower inflation has slowed since mid-year.

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This could mean the Federal Reserve will be more cautious in cutting interest rates next year.

The Labor Department’s report on Wednesday showed the consumer price index (CPI) climbing 0.2% for the fourth consecutive month, aligning with economists’ forecasts.

Shelter, food prices contributed the most

The main contributor was a 0.4% increase in shelter costs, encompassing rents and lodging prices, which made up over half of the overall CPI rise.

In comparison, shelter costs had risen by 0.2% in September. Food prices also played a role, ticking up 0.2% after a 0.4% increase in the prior month.

Within food categories, grocery prices saw a slight 0.1% increase due to higher costs for bread, dairy products, nonalcoholic beverages, and fruits and vegetables, which offset declines in meat, poultry, and fish prices.

Notably, egg prices dropped sharply by 6.4%.

Energy prices displayed mixed trends: gasoline prices fell 0.9%, continuing their decline, while electricity costs surged 1.2% and natural gas prices rose 0.3%.

On an annual basis, the CPI advanced by 2.6% in the 12 months through October, up from a 2.4% increase in September.

The higher year-on-year figure partially reflects a low reading from the previous year being excluded from the comparison.

This inflation report comes on the heels of former President Donald Trump’s election victory over Vice President Kamala Harris.

Analysts anticipate that if Trump implements his economic agenda—featuring tax cuts and increased tariffs on imports—consumer prices could rise further.

His promise of mass deportations of undocumented immigrants is also expected to tighten the labor market, potentially increasing business costs that would be passed on to consumers.

Despite underlying inflation running slightly warm in October, expectations remain that the Federal Reserve will proceed with a planned interest rate cut in December, marking the third such cut this year.