Market Wire: US Inflation Stabilises, Markets Express Relief

Consumer price growth held steady in the United States last month, avoiding a widely-feared surge, and giving the Federal Reserve room to ease policy settings in December. According to data published by the Bureau of Labor Statistics this morning, the core consumer price index - with highly-volatile food and energy prices excluded - rose 3.3 percent in October from the same period last year, up 0.3 percent on a month-over-month basis, while matching September’s pace. This was in line with consensus estimates among economists polled by the major data providers ahead of the release, suggesting that hurricanes Helene and Milton played a relatively minimal role in influencing underlying price dynamics.

On a headline all-items basis, prices climbed 2.6 percent year-over-year, accelerating slightly from the 2.5 percent pace set in September, and were up 0.2 percent from the previous month. Energy costs flatlined on a month-over-month basis, and food prices rose just 0.2 percent, helping relieve overall price pressures, The shelter sub-index—long the biggest contributor to overall inflation pressures—climbed 0.4 percent even as the “owners equivalent rent” category continued to soften, contributing more than half of the total monthly increase.

Today’s report comes after market-implied inflation expectations surged in the wake of Donald Trump’s election to a second term, but should help lower near-term uncertainty levels facing policymakers at the Federal Reserve when they meet again in December. In the absence of a shockingly-strong November payrolls report, the path should be clear for another quarter-point rate cut, to be followed by more easing at subsequent meetings in the new year. Treasury yields are coming down, equity futures are surging, and the dollar is retreating against its major rivals as traders express relief.