US inflation accelerated in October from the pace it set a month earlier — raising doubts whether the Federal Reserve will continue to cut interest rates before the end of the year.
The Consumer Price Index rose 2.6% versus a year ago last month — above the 2.4% increase seen in September, but falling in line with expectations, the Labor Department said on Wednesday.
Month-over-month, the CPI rose 0.2% in line with economists’ expectations, the same increase as last month.
Core inflation, which excludes volatile energy and food prices, rose 3.3% versus a year ago in October. Month-over-month, core inflation grew 0.3% — in line with a month earlier.
Stock futures dipped lower early Wednesday morning as steam from the Trump trade cooled off and traders’ focus turned to CPI, an indicator of whether the Fed will slash rates again before the end of this year.
“US CPI will be a key factor in the Fed’s decision next month. It is particularly important this time around, as there’s been speculation the Fed might skip this meeting and not cut at all,” Deutsche Bank analysts said.
The Fed’s next meeting is scheduled for Dec. 17 – 18. Investors currently see a 62.1% chance the central bank will lower rates at this next meeting, according to CME FedWatch.
Inflation has eased significantly since its pandemic-induced peak of 9% in 2022 — but meeting the Fed’s 2% goal may be the hard part, according to BeiChen Lin, investment strategist at Russell Investments.
“The last stretch of the inflation fight can be filled with twists and turns,” Lin told Barron’s. “And this month, markets are expecting that the inflation fight might take a bit of a pause.”
Though inflation has stayed above 2%, the central bank slashed its key lending rate by an outsize half point in September and again by a quarter point last week after President-elect Donald Trump’s victory, turning its attention to employment.
Employers added just 12,000 jobs in October — far slower growth than expected — for the lowest job total since December 2020 as devastating hurricanes and a major strike by Boeing employees crushed jobs, according to the US Bureau of Labor Statistics.
Economists surveyed by Dow Jones had expected payrolls to expand by 100,000, which still would have been a huge drop from September’s revised 223,000.
The employment rate remained unchanged at 4.1% and the number of unemployed people was little changed at 7 million, according to government data.
The jobs report, which showed growth far below already poor expectations, could discount the Fed’s success with rate cuts and dispel the economy’s so-called soft landing, which is a slowdown in growth without enflaming a recession. But the US Bureau of Labor Statistics acknowledged that “payroll employment estimates in some industries were [likely] affected by the hurricanes.”
