The October Inflation Report from the Bureau of Labor Statistics seems to have offered a glimmer of hope to consumers, reporting that inflation rates did not rise as they were expected to during the month.
In October, the consumer price index dropped to 7.7%, lower than the 7.9% analysts originally predicted, and down from 8.2% in September, according to The New York Times.
Crunching the numbers
October’s report hinted that the worst of inflation may be behind us, with the month's 7.7% increase being the lowest increase since January, which sat at 7.5%.
Following the recession of 2008, the CPI has sat roughly around the 2% level, with a few low points in 2014, according to the statistics bureau. After a sharp drop to 0.1% in May 2020, the CPI experienced whiplash in 2021, as inflation began to climb at historic rates, peaking at 9.1% in June 2022. While October’s drop to 7.7% may feel like a breath of fresh air from the rest of this year, it's still a far cry from the pre-pandemic rates.
Although inflation seems to be slowing, shelter prices were still on the rise last month. October’s CPI report shows that the price of shelter made up half of the monthly increase of all items, rising at the highest rate since 1990. Energy rose 1.8% in October after falling for three months prior, and over the last 12 months has risen by 17.6%.
On a lighter note, food prices increased by only 0.6% in October, as opposed to a 0.8% increase in September. The report states that food at home prices — food from grocery stores — increased by only 0.4%, the smallest increase since December 2021.
However, CNBC states, the decline in annual inflation rates doesn’t mean that the price of goods is lowering — it means that the prices aren’t increasing as fast.
Looking ahead
According to Business Insider, analysts at JPMorgan predict that by Sept. 2023, the overall core inflation rate — excluding food and energy prices — could drop down to a 3.4% year-over-year rate, which is a stark drop from October’s 6.3% core rate.
However, members of the Federal Reserve are hesitant to celebrate an end to the yearlong grasp inflating prices has had on Americans. According to The New York Times, “A single month of moderate improvement in the data was not enough to make central bankers confident that still-rapid price increases will quickly fade, especially after more than a year and a half of stubborn inflation and frequent false dawns.”
Returning to ‘normal’
During a press conference earlier this month with Jerome Powell, the chairman of the Federal Reserve, said that the fed is “strongly committed” to bringing the nationwide inflation rate back down to 2%, which is considered a “healthy” inflation level for the economy. He said that the fed is equipped with “the tools we need and the resolve it will take to restore price stability on behalf of American families and businesses.”
However, in order for inflation to eventually drop to that 2% goal, the Federal Reserve does not plan on pausing the increase of interest rates.
During the press conference, Powell stated, “It’s very premature in my view to think about or be talking about pausing our rate hike. We have a ways to go. ... We need ongoing rate hikes to get to that level.”