Business News

Inflation fell in October as the Fed works to slow the economy

Inflation slowed further in October, offering a dose of encouragement as the Federal Reserve seeks enough progress to abandon its struggle to control consumer prices and slow the economy.

Data from the Bureau of Labor Statistics Tuesday morning showed that prices rose 3.2 percent in the year ending in October. This is down from the annual figure of 3.7% recorded. In September and August, but still above the 2 percent considered the normal rate. Compared to the previous month, prices in October remained stable.

Perhaps the most telling detail is a measure of inflation that strips out volatile categories like food and energy to give policymakers a clearer idea of ​​how prices are embedded in the economy. This figure, known as “core inflation”, increased by 4% from the previous year, the smallest 12-month change since September 2021.

Overall, headline inflation looks much better than in 2022, when prices hit a 40-year high and threatened the entire economy. But even today, the prices of groceries, health care, car insurance, rent and more are higher than before the start of the pandemic, weigh on citizens’ budgets and harm their perception of an otherwise strong economy.

Housing costs, namely rent, remain the largest contributor to overall inflation. Rent costs increased by 0.5 percent in October compared to September, the same rate as since the summer. Policymakers are generally optimistic that rent costs will decline as about a million multifamily rental units come on stream later this year and next year. The costs of new leases have already decreased.

But it will take time for these differences to be reflected in official data. And some housing experts question how much rent will significantly stabilize as so much newly built housing shifts toward the high end of the market.

Food prices rose 0.3 percent in October, after rising 0.2 percent in each of the past three months. Auto insurance and medical care have also increased.

But some sectors of the economy are seeing prices fall steadily. The gasoline index fell 5 percent in October, after falling 2.1 percent in September. The used car and truck index also fell 0.8 percent in October, after falling 2.5 percent in September.

Tthrough it all, the Fed is working to eliminate remaining sources of inflation that have not responded to its aggressive measures. The central bank raised its benchmark interest rate to between 5.25 and 5.5 percent, the highest level in 22 years, in hopes of controlling rising prices.

The economy is booming, but inflation continues to embitter Americans

Tuesday’s Consumer Price Index data won’t dramatically change the Fed’s plans going forward. Officials have long said they need months of information — on prices, employment, wages, spending and more — to understand where the economy is heading.

In recent months, officials have retained on raising rates to assess whether their policies are working or whether they need to push even harder.

In a speech Last week, Fed Chairman Jerome H. Powell said the central bank I would not hesitate to raise rates again if necessary. Meanwhile, those responsible “will move carefully” so that they can balance “both the risk of being misled by a few good months of data and the risk of over-tightening.”

Faced with a strong economy, the Fed wonders how to slow it down

“We know that continued progress toward our 2% goal is not assured,” Powell said. “Inflation has given us some false pretenses. »

But more generally, the economy continues to shine. The economy grew up like gangbusters between July and September. The job market is slowing but remains at a steady pace 34th consecutive month of gains in October. Moreover, the recession that seemed virtually guaranteed a year ago has largely disappeared from economists’ forecasts.

In an analyst report released last week, Goldman Sachs kept the probability of a recession over the next 12 months at just 30%. 15 percent, thanks to the growth in real disposable income, the expected revival of the manufacturing sector and the ability of the Fed, so far, to gradually bring down inflation without triggering a major slowdown.

U.S. economy sees explosive growth in third quarter

Yet even though most Americans are in a better financial situation than before the pandemic, many still are. sour on the economy. And inflation is one of the main reasons.

This frustration poses a huge political challenge to the White House, with only 30% of voters approving of Biden’s handling of the economy. This is the lowest figure since he took office, according to a Washington Post-ABC News Poll.

Yet economists wonder why people can feel so depressed yet still spend big on vacations, concert tickets and dine at the restaurant. They are expected to maintain this momentum through the holidays, keeping the economy humming through 2024.

At Weber’s Cider Mill Farm in Parkville, Md., heavy rains caused a little less foot traffic this fall. But beyond that, buyers kept showing up, said Stephanie Carstetter, chief operating officer.

Supply chain issues have also improved significantly since 2022, when farm suppliers struggled to keep glass jars in stock, for example. But now, with enough planning, Carstetter can count on enough basic products – such as jars and plastic packaging – to keep his business running smoothly.

The market and cider house tend to be busiest from mid to late October, with children and their families. But Carstetter said even longtime and older buyers, who may have less wiggle room in their budgets, have also remained loyal.

“They are adapting like the rest of us,” she said.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button