US Retail Inflation Surges By 2.6%: What This Means for Fed Rate Cuts

The Consumer Price Index in the United States has increased by 0.2 percent on a seasonally adjusted basis in October, according to the data released by the US Bureau of Labor Statistics.

Over the last 12 months, the all-items CPI has increased by 2.6 percent before seasonal adjustment, compared to a 2.4 percent increase in September.

CPI & Fed Rate Decision

The rise in the annual CPI reading has added uncertainty to the US Federal Reserve’s rate cut trajectory. Some economists believe that the Jerome Powell-led US Fed may avoid aggressive rate cuts in the near future, as the annual retail inflation figure has now moved further from the US Fed’s 2 percent goal.

Fed’s November Rate Cut Decision

Remember, just last week the US Federal Reserve announced its second consecutive interest rate cut. On November 7, the Federal Open Market Committee lowered its benchmark overnight borrowing rate by 25 basis points, to a target range of 4.50%-4.75%. This decision followed September’s 50 basis points reduction, indicating a less aggressive pace of rate cuts.

US Consumer Price Index: The Fine Print

Looking at the annual changes, the all-items CPI rose by 2.6 percent for the 12 months ending October, after rising by 2.4 percent over the 12 months ending September. The all-items less food and energy index rose by 3.3 percent over the last 12 months. The energy index decreased by 4.9 percent for the 12 months ending October. The food index increased by 2.1 percent over the last year.

US CPI: Monthly Changes in October

On a monthly basis, the index for all items less food and energy rose by 0.3 percent in October, as it did in August and September. Indexes that increased in October include shelter, used cars and trucks, airline fares, medical care, and recreation. The indexes for apparel, communication, and household furnishings and operations were among those that decreased over the month.

The index for shelter rose by 0.4 percent in October, accounting for over half of the monthly all-items increase. The food index also increased over the month, rising by 0.2 percent, as the food-at-home index increased by 0.1 percent and the food-away-from-home index rose by 0.2 percent. The energy index was unchanged over the month, after declining by 1.9 percent in September.

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