U.S. Consumer Prices Rise in October

(Reuters) – U.S. consumer prices increased as expected in October, with a slowdown in progress toward lower inflation noted since mid-year. This could lead to fewer interest rate cuts by the Federal Reserve next year.

The consumer price index (CPI) rose 0.2% for the fourth consecutive month, as reported by the Labor Department on Wednesday. For the year ending in October, the CPI increased by 2.6%, up from 2.4% in September. These figures were in line with predictions from economists polled by Reuters. The rise in annual inflation also reflects last year’s low figures dropping out of the calculation.

CPI excluding food and energy saw a 0.3% rise in October, also maintaining this increase for three months in a row. Over the 12 months through October, the core CPI grew by 3.3%, consistent with previous months.

Market Reaction

• Stocks: U.S. stock index futures rose by 0.2%, signaling a steady start on Wall Street.
• Bonds: The yield on the 10-year U.S. Treasury fell to 4.378%, while the two-year yield fell to 4.273%.
• Forex: The dollar index weakened further, down 0.2%, while the euro rose by 0.16%.

Comments by Analysts

Ellen Zentner, Chief Economic Strategist, Morgan Stanley Wealth Management, New York

“No surprises from the CPI, so for now, the Fed should be on course to cut rates again in December. Next year presents more uncertainty regarding potential tariffs and other policies from the Trump administration.”

Ross Mayfield, Investment Strategist, Baird, Kentucky

“The risk was that inflation data would come in high, forcing the Fed to reconsider its cut cycle. The numbers aligned expectations, providing markets a chance to refocus.”

Ben Vaske, Senior Investment Strategist, Orion Portfolio Solutions, Omaha, Nebraska

“The CPI data showed a year-over-year increase of 2.6%. Key areas like shelter, transportation, and electricity exert inflationary pressure, although lower oil and gas prices provided relief.”

Matt Bush, U.S. Economist, Guggenheim Investments, New York

“The data shows inflation is not re-accelerating. There’s a sigh of relief that inflation is stable, and yields should remain in the four to four-and-three-quarters range for the coming months.”

Robert Pavlik, Senior Portfolio Manager, Dakota Wealth, Fairfield, Connecticut

“The CPI coming in as expected eased concerns, causing Treasury yields to drop and supporting stock futures.”

Seema Shah, Chief Global Strategist, Principal Asset Management

“Considering potential inflationary policies from Trump, today’s CPI number mitigated the market's concerns, indicating a potential rate cut in December.”

Quincy Crosby, Chief Global Strategist, LPL Financial, Charlotte, North Carolina

“The CPI results across all components brought relief to Treasuries and contributed to a rise in equity futures.”

Brian Jacobsen, Chief Economist, Annex Wealth Management, Menomonee Falls, Wisconsin

“Inflation numbers matched expectations, but underlying data hint at gradual improvement ahead.”