Annual inflation measured by the core Personal Consumption Expenditure (PCE) index slowed to the lowest level since March 2021. The cooldown reflects a drop in energy costs.
The index gained 3% in the 12 months through October, from 3.4% in September, the Commerce Department said in a statement Thursday. The core PCE, which excludes costs of food and energy and is closely followed by the Federal Reserve to decide on interest rates, rose 3.5% from 3.7% in September.
The data matched the estimates of economists surveyed by Reuters.
On a monthly basis, the index was unchanged from September. Excluding energy and food, there was a gain of 0.2%.
"After fears of 'sticky' and 'persistent' inflation, the month to month slowing in the core PCE readings is encouraging," Kathy Jones, Chief Fixed Income Strategist at Charles Schwab, posted on X after the data was released Thursday.
The report also showed that personal consumption sharply slowed to 0.2% in October from 0.7% in September, while income grew 0.2%, half the rate of the 0.4% posted in the previous month.
The Fed, which targets annual inflation of 2%, meets Dec. 12-13 to decide on interest rates. The U.S. central bank maintained its key rate in the range of 5.25% to 5.50% on Nov. 1, the highest level in 22 years.
The second estimate for the U.S. gross domestic product in the third quarter showed an economic growth of 5.2%, more than the first estimate of 4.9%. However, the data released Wednesday showed a downward revision for consumer spending and inflation in the period.
Senior Fed officials have said that the economy and inflation are reacting with a slowdown to the current level of interest rates. Their comments are being interpreted as a signal that the tightening cycle could have ended.