Consumer prices rose as expected in October but rates continued to rise, according to the latest report from the Bureau of Labor Statistics.
- Consumer prices increased 0.2% in October, marking the fourth consecutive month of price growth.
- This gradual increase nudged year-over-year inflation to 2.6%, up from September’s 2.4% and signaling the first year-over-year rise since March.
Food prices in October rose 0.2%, a slower pace than September’s 0.4% but still notable as the second-highest monthly increase this year.
- Dining out continues to drive food inflation, with restaurant prices up 3.8% compared to last year, far outpacing the 1.1% increase for groceries.
Energy prices, meanwhile, remained unchanged, marking the sixth straight month of flat or falling costs in this sector. Gasoline prices have been declining, with a 12.2% drop from last year.
Core inflation—which excludes food and energy—remains elevated, rising 0.3% for the third month in a row, pushing annual core inflation to 3.3%.
Housing: Shelter costs continue to apply upward pressure, rising 0.4% in October after a smaller gain in September. The annual increase remains high at 4.9%, making shelter one of the more persistent drivers of inflation.
Rates: The market response was immediate: the 10-year Treasury yield dropped by 10 basis points on the initial report but quickly rebounded, closing two basis points higher at 4.47%.
- The modest increase reflects investor caution, as persistent price growth in core categories continues to keep the Federal Reserve on alert.
What They’re Saying: Jeanna Smialek noted at The New York Tikmes, “The report today underscores why Fed officials have been hesitant to declare victory over inflation. While 2.6 percent is a lot better than the 9.1 percent peak inflation reached in 2022, it isn’t back to normal.”
Bottom Line: Inflation is still well off of the highs but getting back to 2.0% is not going to be a straight line and therefore rates will stay higher for longer.
