US consumer inflation cooled more than expected last month, according to government data published today, providing some welcome news for policymakers looking to control price increases without damaging the economy.
The consumer price index (CPI) inflation gauge increased by 3.2% in the 12 months to October, down from 3.7% a month earlier, the Labor Department said in a statement.
"It was a move very much in the right direction," OANDA's senior market analyst, Craig Erlam, told AFP.
Inflation was unchanged month-over-month in October from September, with a sharp monthly decline noted in energy prices.
Both the annual and monthly figures came in below the median expectations of economists surveyed by MarketWatch.
While the decline in the gasoline index was responsible for the slowdown in prices, it was partially offset by a continued increase in the index for shelter, the Labor Department said.
Although easing inflation is good news for consumers, the current rate of inflation as measured by a range of gauges remains stuck firmly above the Fed's long-term target of 2%.
The US Fed recently held its key lending rate at a 22-year high for a second consecutive meeting, leading some analysts and traders to predict it was done tightening monetary policy.
But since then, a number of policymakers, including Fed Chair Jerome Powell, have indicated that they are prepared to hike rates again, if necessary, to bring price increases firmly down to target.
Stripping out volatile food and energy segments, so-called "core inflation" cooled to 4% last month, the smallest 12-month change since the period ending September 2021, the Labor Department said.
Core inflation is closely watched by analysts and traders, since it paints a clearer picture of how some of the underlying factors in the economy are doing.
On a monthly basis, core CPI inflation increased by 0.2%, down from 0.3% a month earlier. The figures for core inflation also came in below expectations.
"I think the Fed will be pleasantly surprised," said Erlam from OANDA.
"Seeing that 0.3% on a monthly basis become a 0.2% I think will leave them feeling a little bit more relaxed that they are still heading in the right direction," he said.
The cooler inflation figure raises the chances of the Fed holding interest rates for a third consecutive meeting in December, he added.
Over the next few months, economists at Goldman Sachs expect core CPI to remain "around" 0.3%, according to a recent investor note.
