The Fed's preferred inflation measure was raised in October, with core prices up 2.8% over the past year, underscoring the continuing challenge of stubborn inflation despite months of continued weakness.
The personal consumption expenditure price index, which measures changes in the cost of goods and services, rose 0.2% in the month. Excluding volatile food and energy costs, the core index rose 0.3% in October. Over the past 12 months, the composite index has increased by 2.3%, outpacing the 2.1% year-on-year increase recorded in September.
These numbers were in line with expectations, as economists had expected core inflation to rise by 2.8% annually, given the relatively predictable nature of this indicator based on previous data releases.
Core inflation remains near 3%, complicating the Fed's decision-making to consider further adjustments to interest rates. After first cutting interest rates in September in response to what it saw as signs of an economic slowdown, the central bank is now deciding how to balance boosting growth with ensuring inflation stays close to its 2% target. facing a dilemma.
Inflation has been leveling off in recent months, raising questions about whether the Fed will pause further rate cuts at its next meeting in December or January. The hesitation reflects broader uncertainty about the trajectory of prices and the overall strength of the economy heading into the new year.
The resurgence of upward pressure on inflation also calls into question the prudence of the Fed's massive 50 basis point (bp) rate cut in September, followed by a 25 basis point (bp) cut in November. Critics say the Fed acted prematurely and risked pushing up inflation by easing monetary policy too soon.
