U.S. CPI Edges Up in October, Market Keeps Expectations for December Rate Cut

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The U.S. CPI showed a slight increase in October, as reported by the U.S. Bureau of Labor Statistics on November 13.

The October CPI annual growth rate stood at 2.6%, marking a 0.2 percentage point increase from the previous month, while the month-over-month rate held steady at 0.2%. Core CPI, which excludes volatile food and energy prices, exhibited an annual increase of 3.3% and a monthly rise of 0.3%, both figures unchanged from the prior month and in line with market expectations.

Breaking down the components, the increase in CPI was primarily driven by:

• Energy prices, which continued to decline by 4.6% month-over-month, but at a narrower pace than the 6.0% drop observed in the prior month.
• Used car prices rose by 2.7% month-over-month, a notable increase of 2.4 percentage points compared to the previous month.
• Housing services prices increased by 0.4% month-over-month, up from a 0.2 percentage point gain in the prior month. Specifically, rent and owners’ equivalent rent rose by 0.3% (unchanged from the previous month) and 0.4% (up from 0.3%) respectively.

(Source: BLS, TrendForce)

Overall, the upward movement in inflation primarily reflected a narrowing decline in energy prices and a resurgence in used car prices, with a reduced base effect also contributing to the annual increase. Despite these factors, there was no indication of a significant acceleration in overall inflation.

Housing services inflation continues to exhibit some persistence; however, there is positive news as the annual growth rate for new lease rents in Q3 2024 was just 1.01%, down by approximately 11 percentage points from its 2022 peak and remaining at historically low levels, indicating that further cooling may be on the horizon.

(Source: BLS, TrendForce)

Following the data release, market expectations for a December rate cut by the Federal Reserve remained unchanged, with U.S. Treasury yields experiencing a modest decline. This suggests that markets still anticipate potential easing in the Fed’s rate path heading into 2025.

(Source: FedWatch)