October CPI: No Spooky Surprises

Source: Economics Group of Wells Fargo Bank, N.A. Summary October’s softer-than-expected CPI print is an encouraging development for the FOMC and reinforces our view that the FOMC has ended its hiking cycle. But, we do not see the latest data as a game-changer for inflation’s path ahead. With inflation in October held down by volatile components like gasoline, travel services and autos, we expect inflation’s return to 2% will continue to be a slow grind. Inflation Reprieve The consumer price index was unchanged in October, the first time monthly inflation was flat since July 2022. The Bloomberg consensus expected a 0.1% increase in the CPI, so this reading was a bit cooler than anticipated. As was the case in July 2022, a large drop in gasoline prices was the main contributor to the soft monthly reading. Gas prices fell 5.0% in October, more than reversing the 2.1% increase that occurred in September. Energy services prices, which includes electricity and utility gas, rose 0.5% in the month. Food prices increased 0.3% in October with food away from home inflation (+0.4%) outpacing the increase in prices at the grocery store (0.3%). Compared to one year ago, the headline CPI has increased 3.2% (chart). Although this is still about a percentage above the pace that prevailed before the pandemic, it is well below the 9.1% peak that occurred in the summer of 2022. An outright decline in energy prices and much slower increases for food prices have put downward pressure on year-over-year inflation, although core price growth also has slowed to 4.0% from over 6% this time last year. READ FULL ARTICLE >>