US Consumer Price Index inflation declines to 3.2%

US inflation data: Inflation in the US, as measured by the change in the Consumer Price Index (CPI), declined to 3.2 per cent on a yearly basis in October, the US Bureau of Labour Statistics (BLS) reported on Tuesday. The CPI-based inflation data comes below the market forecast of 3.3 per cent.

The consumer prices remained unchanged, primarily influenced by a decline in gasoline prices, while the underlying inflationary trend suggested a slowdown. This development aligns with the prevailing sentiment that the Federal Reserve has likely concluded its interest rate hikes.

The Bureau of Labour Statistics, under the Labor Department, reported a steady reading in the consumer price index (CPI) on Tuesday, following a 0.4 per cent increase in September. Over the 12 months leading to October, the CPI registered a 3.2 per cent climb, a moderation from the 3.7 per cent rise observed in September.

Economists surveyed by Reuters had anticipated a 0.1 per cent increase in the CPI for the month and a 3.3 per cent rise year-on-year.

While the year-on-year figures reflect a decline from the peak of 9.1 per cent in June 2022, the deceleration in inflation has somewhat stalled. This is occurring against the backdrop of a robust economy fueled by a relatively tight labor market, keeping inflation above the Federal Reserve's 2 per cent target.

Despite market expectations and the consensus among most economists that the US central bank's tightening of monetary policy has concluded, Federal Reserve Chair Jerome Powell and other policymakers have emphasized a readiness to tighten policy further if deemed necessary. Since March 2022, the Fed has raised its policy rate by 525 basis points, bringing it to the current 5.25 per cent - 5.50 per cent range.

Excluding the volatile food and energy components, the core CPI increased by 0.2 per cent, driven by elevated costs for rental housing. This core CPI had risen by 0.3 per cent for two consecutive months.

In the October release, the BLS implemented changes to the methodology for calculating health insurance prices, introducing smoothing to the health insurance index to mitigate volatility. The new method also incorporates semiannual financial data, reducing the lag in the index by six months.

On a year-on-year basis, the core CPI advanced by 4.0 per cent in October, a slight moderation from the 4.1 per cent increase observed in September.