OCTOBER CPI REPORT COOLER THAN EXPECTED
Inflation in October was up 7.7 percent year-over-year, down from 8.2 percent in the previous month. The Core CPI, a less volatile measure that excludes energy and food prices, increased 6.3 percent, down from 6.6 percent in the year through September. Even though still running at a historically high pace, the CPI at 7.7 percent is less than the 7.9 percent that analysts had expected.
The market reacted positively to the news, with the S&P 500 soaring 5.5 percent on Thursday – the best one-day performance since April 2020. This is also welcome news for the Fed, which has been rapidly raising interest rates to combat inflation. With only one more FOMC meeting left this year, analysts expect that the Fed will opt for a 50-basis-point increase instead of 75.
Noteworthy details of the inflation report were the long-anticipated decrease in goods inflation such as prices for used cars and clothing. However, housing inflation is still running high. The rent of primary residence is up 0.7 percent from the previous month, and 7.5 percent twelve months through October. These metrics are expected to moderate in 2023.
