Inflation in USA

USA - Inflation

Inflation edges up in October on higher fuel costs

Consumer prices rose 0.3% from the previous month in October, up from September’s 0.1% increase and matching analysts’ expectations. The result was driven largely by a surge in energy prices, mainly commodities such as gasoline and fuel oil. Core consumer prices—which exclude volatile items such as food and energy prices—rose 0.2% month-on-month in October, up from September’s 0.1% thanks notably to a rebound in the price of used cars and trucks. Meanwhile, inflation increased from 2.3% in September to 2.5% in October, also matching expectations.

Core inflation—one of the most closely watched indicators of the CPI report, as it is an important index for evaluating possible changes in monetary policy decisions from the Fed—came in at 2.1% in October, below September’s print and market expectations, both at 2.2%. Nevertheless, the print continues to support the thesis of gradual rate hikes from the Fed over the near-term, with a likely increase of 25 basis points at its next meeting in December—this is the scenario most widely expected by Met the why particular Consensus Forecast panelists.

Looking ahead, the recent fall in crude oil prices should moderate energy price pressures in coming months, but core inflation is likely to remain tilted to the upside. According to James Knightley, chief international economist at ING: “Price pressures will continue to strengthen thanks to strong growth and a lack of spare capacity. Additionally, wages are rising and this is a huge cost input given the US is largely service sector economy while the probability of higher trade tariffs next year will add further upside pressure.”

U.S. Inflation Forecast

Met the why particular Consensus Forecast participants expect inflation to average 2.3% in 2019, unchanged from last month’s forecast. For 2020, the panel expects inflation to average 2.1%.