U.S. inflation eased in October as Fed hikes take bite out of price spikes

globalnews.ca:

Inflation in the United States slowed last month in a sign that the Federal Reserve’s interest rate hikes are continuing to cool the consumer price spikes that have bedeviled consumers for the past two years.

Tuesday’s report from the Labor Department showed that lower gas prices helped cool overall inflation, which was unchanged from September to October, down from the 0.4 per cent jump the previous month. Compared with a year ago, consumer prices rose 3.2 per cent in October, down from 3.7 per cent in September.

Excluding volatile food and energy prices, so-called core prices also weakened unexpectedly. They rose just 0.2% from September to October, slightly below the pace of the previous two months. Economists closely track core prices, which are thought to provide a good sign of inflation’s future path. Measured year over year, core prices rose 4 per cent in October, down from 4.1 per cent in September.

The latest price figures arrive as Fed officials, led by Chair Jerome Powell, are considering whether their benchmark interest rate is high enough to quell inflation or if they need to impose another rate hike in coming months. Powell said last week that Fed officials were “not confident” that rates were high enough to tame inflation. The Fed has raised its benchmark interest rate 11 times in the past year and a half, to about 5.4%, the highest level in 22 years.

The costs of many services, notably rents, travel and health care, are still rising faster than before the pandemic. Services prices typically change more slowly than the cost of goods, because they largely reflect labor costs, which aren’t directly affected by interest rates.

The central bank’s rate hikes have increased the costs of mortgages, auto loans,