Inflation dropped half a percentage point to 3.2% for the year ending in October, thanks in large part to falling gas prices, a welcome development as the Federal Reserve works to contain price increases.
The data reported on Tuesday by the Bureau of Labor Statistics in an update to the consumer price index are good news for President Joe Biden. Biden has been trying to reassure voters that inflation is getting under control, even as he is plagued by low economic approval ratings.
KYRSTEN SINEMA IS FACING ONE BIG PROBLEM AFTER DITCHING THE DEMOCRATIC PARTY TO RUN ON HER OWN
It is also a welcome development for the Fed, which has desperately worked to drive down inflation since March 2022 by hiking interest rates as part of its historic tightening cycle.
On a month-to-month basis, inflation growth was flat at 0%, better than expectations.
Inflation, as measured by the CPI, peaked at over 9% in June 2022 and has been ticking down nearly every month since. There was a bit of an inflationary uptick a few months ago, largely led by shelter and energy prices, but this latest report shows that price growth is moving back toward the Fed’s 2% goal.
“Net, net, there’s no inflation this month, which will ring loud and clear in the markets around the world that Fed officials are done with interest rate hikes this year,” said Chris Rupkey, chief economist at FWDBONDS. “The Fed always wants to see more progress, but it is looking like the inflation battle has rounded the corner and is heading for home in the race to return inflation back to the 2% target.”
The energy index fell 2.5% over the month, and there was a pronounced 5% decline in the gasoline index, a major factor in the overall decline in headline inflation.
“Core inflation,” which strips out volatile food and energy prices, fell to 4% for the year ending in October. Overall, core inflation has largely trended down this year, something that bodes well for the country’s economic outlook.
The central bank’s target rate is 5.25% to 5.50%, with the Fed last raising rates in July. The Fed has opted to keep rates steady since then as officials assess the various inflation, employment, and other economic reports.
Soaring inflation has made life much more unaffordable over the past couple of years and has undercut support for Biden and his economic plan. While the Biden administration has pointed to inflation slowing from its peak last year, Republicans have pointed out that price growth is still above the Fed’s 2% goal and inflation, when looked at from its pre-pandemic baseline, has exploded far beyond what is healthy.
Many in the GOP have blamed the price growth on pandemic-era spending that they contend overheated the economy and caused demand to explode, pushing up wages and prices. Meanwhile, many Democrats argue inflation has risen in other countries across the West and that the key inflationary drivers came not on the demand side but on the supply side.
Even amid the higher interest rate environment, other parts of the economy have remained quite robust.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
For instance, GDP growth accelerated to a 4.9% seasonally adjusted annual rate in the third quarter of this year, up from 2.1% the quarter before, the Bureau of Economic Analysis reported. That was above the expectations of economists who were forecasting a still-strong 4.2% increase.
The labor market has remained above water, although the most recent jobs report for October showed that it is starting to cool. The economy added just 150,000 jobs in October, less than most economists had projected and well below September’s gain of 297,000.
