Fed Seen Slowing Rate Hike Pace as Inflation Eases

A larger than expected drop in consumer inflation last month will likely prompt the Federal Reserve to pare down future interest rate increases as the impact of its swift monetary tightening this year begins to take hold.

October data published Thursday by the Labor Department showed key items like rents increasing less than expected, while the price index for used cars – a culprit in the initial, pandemic-related surge in inflation – declined by 2.4%, the fourth consecutive monthly drop. Prices for airfares, medical services, and apparel all declined.

Though overall inflation remained high by historic standards, with prices increasing 7.7% from a year earlier, the monthly pace of “core” inflation that excludes volatile food and energy costs dropped by half, to 0.3% in October from 0.6% the month before.

Some analysts said this may just be the start of inflation being defused after emerging last year as a chief risk to the economy.

“This is not some kind of outlier,” wrote Omair Sharif of Inflation Insights. “This is the start…of lower prints.”


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