US inflation rose as expected in October

In October, US inflation rose by 0.2% month-over-month, consistent with September and meeting forecasts. The annualized inflation rate climbed to 2.6% from 2.4% in September, also aligning with expectations. Core inflation, which excludes food and energy, increased by 0.3% month-over-month, maintaining this pace for the third consecutive month, while the annual core CPI remained steady at 3.3%, as anticipated.

This data suggests that the recent decline in inflation toward the Fed’s target has slowed, which may lead the Fed to reconsider its interest rate strategy and potentially reduce the number of rate cuts planned for next year.

Americans’ concerns over inflation, which has fallen from a peak of 9.1% in June 2022 but remains above the Fed’s 2% target, were a significant factor in Donald Trump’s recent election victory.

Economists forecast that inflation could rise next year if Trump rapidly enacts his economic policies, such as tax cuts, increased tariffs on imports, and large-scale deportations of undocumented immigrants, which could strain labor supply and drive up business costs.

The Fed is widely expected to cut interest rates again in December, likely by 25 basis points to a 4.50%-4.75% range. However, market expectations for further aggressive cuts in 2025 have moderated under the new political landscape, especially with signals that Republicans may soon gain control of the House of Representatives after securing Congress.