The Federal Reserve cut interest rates in September for the first time in years, and the inflation rate responded with a slight uptick.
U.S. inflation rose 2.6% on an annual basis in October, matching forecasts from economists polled by FactSet. The CPI rose 2.4% in September, when the Fed cut rates 0.5 percentage points, followed by a second rate cut earlier this month.
CBS News reported the slight rise on a month-over-month basis could signal a “bumpy ride” in the Fed’s fight to tame inflation to its goal of a 2% annual rate. Some types of goods and services, from housing to insurance products, are still experiencing sharply higher prices, crimping consumers’ budgets and creating economic headwinds.
“Looking ahead to the next six months, we foresee consumers and businesses still spending but doing so more prudently amid still-elevated costs and rates,” noted EY chief economist Gregory Daco in a November 11 research note, according to the network.
A key driver of last month’s inflation bump was the housing market, with shelter prices rising 0.4% in October, contributing about half of the monthly increase, the Bureau of Labor Statistics said on Wednesday. Transportation costs also rose due to higher airfares and a 14% annual jump in auto insurance, the report said.
Despite the slight rise, the Federal Reserve is still expected to cut rates (by 0.25 percentage points) for a third time this year at its December meeting. The latest CPI report isn’t likely to derail that, given that the inflation numbers were in line with expectations, Lindsay Rosner, head of multi sector fixed income investing at Goldman Sachs Asset Management, noted in an email to CBS.
“Bang in-line core inflation leaves the Fed on track to cut rates in December,” Rosner wrote. “After a run of unseasonably hot autumn data, today’s number cools fears of an imminent slowdown in the pace of rate cuts.”
