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The Line: Inflation Rose Less than Expected in October

Gregory Heym is Chief Economist at Brown Harris Stevens. His weekly series, The Line, covers new developments to the economy, including trends and forecasts. Read on for the latest report and subscribe here to receive The Line in your inbox.

Consumer prices rose 0.4% last month and were 7.7% higher than a year ago. That may not sound like good news, but these days, it always helps to look on the bright side of things. Two important takeaways here are:

1. These increases were less than the Dow Jones forecasts, so they are a nice surprise.

2. Since peaking at 9% in June, the annual increase in the consumer price index has fallen each of the past four months. Don’t believe me? Look for yourself:

Feel better yet? After all, when it comes to inflation these days, we’ll take any good news we can get.

Core inflation—which excludes volatile food and energy prices—rose 6.3% over the past year, which was also lower than forecasts. This figure hit a 40-year high of 6.6% last month, so any decline should be welcomed with cautious optimism. Last month, the biggest contributor to inflation was shelter costs, which rose 0.8%—their highest monthly gain since 1990. According to the BLS’ press release, shelter was responsible for over half the increase in the overall inflation, which is nothing short of astounding. If you’d like to view the full press release with all its complicated tables, you can find it here. To sum up, here’s what you need to know about this report:

  • It was better than expected.

  • If offers hope that inflation has peaked—although it’s still a big problem.

  • Analysts think this data might encourage the Fed to hike short-term rates by only 0.50% at their meeting next month. They have approved 0.75% hikes at each of their past four meetings.

  • This is why stocks surged after the data was released last week.

The next reading on inflation will come out on November 15, when the producer price index for October is released.

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