Economy of the United States seems to be getting better as inflation dropped to 7.7% in October compared to 8.2% in September 2022.
Although prices of goods and services in the country were still considered to be up compared with the same time last year, but it’s obvious that the latest report is a sign that inflation is slowly starting to cool after reaching decades-high records over the last few months.
The US Bureau of Labor Statistics reported on Thursday that in October, the consumer price index showed a 7.7% rise in prices over the last 12 months, a 0.5 percentage-point decrease from September, which saw a rate of 8.2%. The October inflation rate is the lowest since January, when rates rose to 7.5%.
Along with the slight cooling in the overall inflation rate, the core inflation rate, which excludes the volatile energy and food sectors, also showed a small tempering off, reaching 6.3% – a small increase compared to the core inflation rate last month.
The rise in prices can largely be attributed to the continuing rise in housing prices, which rose 6.9% over the last year. And while gas prices have been decreasing month-by-month, gas prices rose 4% over the last month in October, the first monthly increase since June. Gas prices have overall risen 17.5% over the last year.
Multiple sectors saw decreases in prices, including used cars and trucks, apparel and medical care services. The price of food has been rising more slowly than in previous months, increasing 0.6% from September to October, and rising 10.9% over the last 12 months.
US stock futures quickly rose after the report’s release, showing Wall Street’s hopes that October’s rate signals a downward trend for inflation. The Nasdaq rose 5% ,while the S&P 500 and the Dow jumped 3.5% and 2.8 respectively.
While October’s inflation rate is slightly lower than analysts expected, it is still much higher than the 2% target rate that the Federal Reserve has been trying to reach.
The Fed, led by Jerome Powell and on a mission to temper inflation, has been raising interest rates since March after rates sat still early in the pandemic. Last week, the Fed increased rates for the sixth time, to 3.75% to 4%, making borrowing money for loans such as credit card use and mortgages more costly.
Powell said the Fed would slow rate rises at some point but it was still “very premature to think about pausing”.
In an interview with Reuters on Wednesday, the Richmond Federal Reserve chair, Thomas Barkin, said it seemed the US was “on the back end” of inflation, but the Fed would determine how much more interest rates needed to rise according to “how malleable” inflation would be.
“That is a question we are trying to figure out,” he said.
The October inflation numbers come two days after the midterm elections. Polls and surveys have shown that the economy, specifically rising prices, were top of mind as voters headed to the polls.
Republicans blamed Democrats for inflation, though election results ultimately showed Democrats had performed more strongly than expected. (The Guardian)
