October’s Consumer Price Index (CPI) will serve as the latest test of whether a resurgence in inflation is a risk to the U.S. economy as the Federal Reserve debates its next interest rate decision after cutting rates. by a quarter of a percentage point last week.
Read more: What the Federal Reserve’s rate cut means for bank accounts, CDs, loans and credit cards
The report, which will be released Wednesday at 8:30 a.m. ET, is expected to show headline inflation of 2.6%, a slight rebound from September’s 2.4% annual price increase. which marked the lowest overall annual reading since February 2021. Consumer prices are expected to have increased 0.2% from the previous month, matching the monthly increase seen in September.
On a “core” basis, which excludes the more volatile costs of food and gas, prices in October are expected to have increased 3.3% from last year for the third month in a row. Economists expect monthly increases in core prices to also match the previous month’s reading of 0.3%, according to Bloomberg data.
Core inflation has remained persistently elevated due to higher costs for accommodation and services such as insurance and healthcare.
“The October CPI report will likely support the idea that the last leg of inflation’s journey toward its target will be the most difficult,” Wells Fargo chief economist Jay Bryson wrote in a note to clients on Friday.
Bank of America economists Stephen Juneau and Jeseo Park agreed, writing in a preliminary note Monday that “inflation [is] “It is unlikely to show much progress” and that the next CPI release will likely show inflation “moving sideways after a period of substantial disinflation.”
Although inflation has been slowing, it has remained above the Federal Reserve’s 2% annual target.
The inflation outlook remains uncertain as economists warn of another possible resurgence of inflation following the election of Donald Trump as the country’s next president.
Compared to the current Biden administration, Trump and his proposed policies have been seen as potentially more inflationary due to the president-elect’s campaign promises of high tariffs on imported goods, tax cuts for corporations and restrictions on immigration.
In a news conference after the latest rate cut, Federal Reserve Chair Jerome Powell said the central bank does not and will not make decisions based on expected policy changes from a new administration.
“In the short term, the elections will have no effect on our political decisions,” he said at the time. “We don’t know what the timing and substance of any policy change will be. Therefore, we don’t know what the effects on the economy would be, specifically whether and to what extent those policies would be important to achieving our goals. Target variables: maximum employment and price stability.”
