America’s latest inflation report card just dropped

The Consumer Price Index, America’s most widely-used measure of inflation, is pulling its best Wright brothers impression and slowly gliding back down to Earth after reaching historic heights.

According to Labor Department figures published yesterday, US inflation stood at 3.2% over the year-long period ending in October, down from 3.7% in September.

• Core inflation – which excludes often-volatile food and energy prices – stood at an annual rate of 2.8% for the five months ending in October, compared to 5.1% during the first five months of this year.
• Analysts attribute the recent trend to falling prices for cars, fuel, and airfares, as well as slower growth in housing costs.

The market reacts: At the start of trading yesterday morning – exactly one hour after the CPI was released – all three major US indexes opened significantly higher than Monday’s closing price. Stocks remained at elevated levels for the rest of the trading session, with the S&P 500 notching its best single-day performance since April (S&P: +1.9% | Dow: +1.4% | Nasdaq: +2.4%).

👀 Looking ahead… The Fed, which raised interest rates to a 22-year high this summer to combat inflation, is widely expected to hold rates steady for a sixth straight month in response to yesterday’s inflation report. Analysts also say the better-than-expected CPI figures reduce the chances of additional rate hikes early next year.