WASHINGTON (AP) — Price increases moderated in the United States last month in the latest sign that the USA inflation pressures that have gripped the nation might be easing as the economy slows.
Consumer inflation reached 7.7% in October from a year earlier and 0.4% from September, the government said Thursday. The year-over-year increase, down from 8.2% in September, was the smallest rise since January. Stripping out volatile food and energy prices, “core” inflation rose 6.3% in the past 12 months and 0.3% from September.
USA inflation The numbers were all lower than economists had expected.
Helping to ease inflation from September to October were used car prices, which dropped for a fourth straight month. Clothing and medical care also fell. Food price increases slowed. By contrast, energy prices rebounded in October after declines in August and September.
Even amid a tentative easing of inflation, the Federal Reserve is will likely continue raising interest rates to cool the economy and stem inflation. Yet data released Thursday raises the possibility that the Fed could at least slow its rate hikes — a prospect that sent U.S. markets soaring.
Many economists warn, though, that in continuing to aggressively tighten credit, the Fed is likely to cause a recession by next year.
So far this year, the Fed has raised its benchmark interest rate six times in sizable increments, heightening the risk that prohibitively high borrowing rates — for mortgages, auto purchases and other high-cost expenses — will tip the world’s largest economy into recession.
Inflation was near the top of many voters’ minds in the midterm congressional elections that ended Tuesday.
Their economic anxieties contributed to the loss of Democratic seats in the House of Representatives, though Republicans failed to score the huge political gains that many had expected.Even before Thursday’s figures, inflation by some measures had begun to ease and could continue to do so in coming months.
Most gauges of workers’ wages, for example, show that the robust pay increases of the past 18 months have leveled off and have begun to fall.
Though worker pay is not a primary driver of higher prices, it can compound inflationary pressures if companies offset their higher labor costs by charging their customers more.
“This signals the beginning of a disinflationary trend that will persuade the Fed to halt (rate hikes) early next year,” said Paul Ashworth, chief North American economist at consulting firm Capital Economics. rice field. “Deflationary pressures are finally emerging as supply constraints normalize.”
Many economists fear central bank ploys could trigger a recession by next year. The Federal Reserve has hiked interest rates substantially six times this year, raising the risk that the cost of borrowing for homes, cars and other big commodities will plunge the world’s largest economy into recession.
Dallas Federal Reserve Bank Governor Rory Logan said Thursday’s numbers were a “welcome relief,” but added that “there’s still a long way to go.”
Acknowledging that rate hikes can lead to layoffs and falling home prices, Logan said the Fed “must do everything we can to restore price stability.” Yet she also opened the door to a more modest pace of rate increases, saying “we should also try, if we can, to avoid incurring costs that are higher than necessary.”
Thursday`s data and reaction by officials like Logan make it more likely that the Fed will lift rates by a half-percentage point at its next meeting in December, economists said, a step down from the string of three-quarter point hikes this year.
In the midterm elections that ended Tuesday, roughly half of voters cited inflation as the top factor, according to VoteCast, an extensive survey of more than 94,000 voters nationwide conducted for The Associated Press by NORC at the University of Chicago. About eight in 10 said the economy was in bad shape, and a slim majority blamed President Joe Biden for worsening inflation. Just under half said factors beyond Biden`s control were to blame.
Economic anxieties may have contributed to the loss of Democratic seats in the House of Representatives, though Republicans failed to score the huge political gains that many had expected. Also, a significant portion of voters (44% according to VoteCast) said their main concern was the future of democracy. This is an issue highlighted by Biden and his Democratic congressional candidate during a time of baseless election denial.
Even before Thursday’s figures were released, inflation was easing in some ways and could ease in the coming months. There are signs that it has started to decline. Workers’ wages are not the main driver of inflation, but if firms offset rising labor costs with higher prices, they could add to inflationary pressures.