Inflation rose two-tenths of a percentage point to 2.6% for the year ending in October, the Bureau of Labor Statistics reported Wednesday in an update to the consumer price index, the first rise in annual inflation in six months.
The increase is unwelcome news for the economy and President-elect Donald Trump as he prepares to enter office early next year. It shows the Federal Reserve will have to continue working to bring down prices and that inflation could be a lingering problem in the new administration.
While the rise is unfortunate news, it was expected. Most economists anticipated that annual inflation would tick up from 2.4% to 2.6%.
On a month-to-month basis, inflation rose 0.2%.
Inflation was the biggest concern on the campaign trail and, according to some analysts, a major factor in Trump besting Vice President Kamala Harris last week.
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Core inflation, which strips out volatile food and energy prices, rose 3.3% on an annual basis, also in line with expectations. Core inflation was 0.3% on a monthly basis.
The rise comes after the Fed met last week and decided to lower its interest rate target by 25 basis points, or, a quarter of a percentage point. The Fed’s goal is 2% annual inflation.
“Three months in a row for 0.3% core monthly CPI changes cannot be music to Fed officials’ ears because it shows the job is not done yet,” said Chris Rupkey, chief economist at FWDBONDS. “After today’s results, it looks like the decision to cut rates 25 more basis points at the final Fed meeting of the year is going to go down to the wire.”
Shelter prices ticked up in October, rising 0.4%. There was also a 2.7% jump in prices for used cars and trucks. Medical care services inflation was 0.4%.
The Fed looks at another inflation gauge, the personal consumption expenditures index, when analyzing its next steps. The PCE index for September, which was released last week, showed PCE inflation falling to 2.1%. But stickier core inflation remained at a 2.7% year-over-year rate.
The latest jobs report was released on Friday and was flashing warning signs about the labor market.
The jobs market flatlined in October, adding just 12,000 jobs, and the unemployment rate remained at 4.1%, the Bureau of Labor Statistics reported.
Investors had expected job growth to slow to 108,000, in part because of damage from hurricanes and a strike at Boeing, but the report was even worse than expected. Also of note, the private sector shed jobs for the first time since the pandemic.
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Still, GDP growth, a broad measure of overall economic expansion, increased by 2.8% in the third quarter of this year — a strong showing.
GDP growth has largely been positive during the time Biden has been in office, although it contracted in the first two quarters of 2022, which, at the time, raised concerns that the United States would fall into a recession — although those fears never materialized.
