Annual inflation may have risen in October for the first time in seven months, indicating a potential stabilization in price increases after a period of cooling. Economists surveyed by FactSet suggest that consumer prices likely increased by 2.6% from the previous year, up from 2.4% in September. Month-to-month, prices are believed to have risen by 0.2% from September to October.
Excluding volatile food and energy costs, core prices are forecasted to have risen by 3.3% from a year earlier, remaining unchanged from the previous month. Core prices are expected to have increased by 0.3% from September to October, surpassing the Federal Reserve's 2% inflation target if sustained.
An increase in prices could raise concerns in financial markets about the pace of inflation moderation. This might lead the Federal Reserve to reconsider its plans to cut interest rates in December and the following year.
Despite the recent uptick, most economists anticipate that inflation will eventually resume its downward trend. Consumer inflation, which peaked at 9.1% in 2022, has been steadily decreasing, although overall costs remain approximately 20% higher than three years ago.
The recent presidential election outcome has introduced uncertainty regarding inflation and the Fed's potential response. President-elect Donald Trump's promises to reduce inflation through increased oil and gas drilling have sparked debates among economists, with concerns raised about the impact of proposed policies such as higher tariffs and mass deportations on inflation.
The economy has been outperforming earlier projections, growing at nearly a 3% annual rate over the past six months. Consumer spending, particularly among higher-income individuals, has been a significant driver of this growth.
Despite some sectors contributing to inflation, such as higher used-car prices and airfares, declines in clothing costs, groceries, gas, and energy prices have offset these increases. Federal Reserve Chair Jerome Powell remains optimistic that inflation will continue to trend downwards towards the central bank's 2% target.
Consumer expectations of future price increases have also moderated, with a survey indicating an anticipated rise of just 2.9% in the next 12 months, the lowest in nearly four years. Lower inflation expectations can help mitigate actions that could further drive inflation, such as accelerated purchases or demands for higher wages.
Additionally, apartment rents have shown minimal growth on average nationwide, providing potential relief for Americans' budgets. While the government's rent measurements reflect a faster increase due to existing leases, new lease rents have only risen by 0.2% from a year ago in October.
