Inflation Ticks Up After Easing for Six Consecutive Months

The annual rate of inflation in October registered higher than in September when the Federal Reserve began cutting interest rates amid signs of cooling prices. The price of goods and services paid by U.S. consumers rose 2.6% in the year-ending October, according to the Consumer Price Index (CPI) for All Urban Consumers measured by the Bureau of Labor Statistics. While that was in line with economist’s expectations, it was up from the 2.4% annual inflation rate the previous month which was the smallest 12-month increase since March 2021 (2.6%). The recent upturn followed six months of easing after inflation clocked in at 3.5% in March 2024. Still, inflation has cooled considerably since reaching a 40-year high of 9.1% in June 2022. For comparison, the inflation rate averaged 1.6% annually in the five years leading up to the COVID-19 pandemic (2015-2019). The Fed’s current target rate for inflation is 2%. Core inflation, which strips out volatile costs of food and energy, was up 3.3% year-over-year in October, matching the rate the previous month and marginally above the 3.2% annual increase in both July and August which were the lowest rates since April 2021. The cost of shelter, which is keeping the overall inflation rate elevated, rose 4.9% from a year ago. Still, that was one of the slowest increases in more than two years. However, the shelter index has a well-documented lag effect. Excluding the cost of shelter, consumer prices were up just 1.3% year-over-year in October.