US inflation may have picked up in October after months of easing

WASHINGTON — Annual inflation may have risen for the first time in seven months in October, a sign that price increases may level off thereafter cool steadily for more than two years.

According to a survey of economists from data provider FactSet, consumer prices rose 2.6% from 12 months earlier, compared to 2.4% in September. Measured month-on-month, prices would have risen 0.2% from September to October, the same as in the previous month.

Excluding volatile food and energy costs, so-called core prices are expected to have risen 3.3% from a year earlier, unchanged from the previous month. From September to October, core prices are expected to have risen 0.3% for the third month in a row – a pace that, if sustained, would exceed the Federal Reserve’s inflation target of 2%.

A rise in prices could fuel concerns in financial markets that progress in curbing inflation could slow. It could make the Fed less likely to cut its key interest rate in December and next year, as its officials have done previously indicated that this would probably be the case.

Still, most economists think inflation will eventually slow again. Consumer inflation, which peaked at 9.1% in 2022, has fallen steadily since then, although overall costs are still about 20% higher than three years ago. The price spike soured Americans on the economy and on the economic stewardship of the Biden-Harris administration and contributed to Vice President Kamala Harris’ loss in last week’s presidential election.

Still, Donald Trump’s election victory has created significant uncertainty about where inflation might go and how the Fed would respond if inflation were to accelerate again. Trump has promised to reduce inflation, mainly by increasing oil and gas drilling. But mainstream economists have warned that some of his proposals, especially substantially higher tariffs on U.S. imports and mass deportations of migrants, would worsen inflation when it is fully implemented.

Stocks rose in the wake of Trump’s election victory, largely on optimism that his proposed tax cuts and deregulation would boost the economy and corporate profits. But bond yields also rose, likely reflecting fears that inflation could remain high or even rise.

Moreover, the economy is growing faster than many economists expected earlier this year. It’s extensive by almost 3% on an annual basis over the past six months, with consumers, especially those with higher incomes, spending freely and driving growth.

“Tax cuts and levies, among other policy proposals, have the potential to have a material impact on inflation, inflation expectations and economic growth,” said Seema Shah, chief strategist at Principal Asset Management. “With uncertainties surrounding tax and trade policy, inflation pressures and economic resilience, the Fed is likely to slow the pace of rate cuts.”

Higher used car prices are believed to have increased overall inflation over the past month. Airfares may also have contributed to fueling inflation.

But clothing costs are believed to have fallen, as have prices for groceries, gas and other energy sources.

Bee a press conference Last week, Fed Chairman Jerome Powell expressed confidence that inflation is still heading toward the central bank’s 2% target, albeit perhaps slowly and unevenly.

“We feel the story is very consistent with inflation continuing to decline on a bumpy path for years to come and hovering around 2%,” Powell said. “One or two really good data months or bad data months aren’t really going to change the pattern at this point now that we’re this far into the process.”

Powell also noted that most sources of price pressure are cooling, suggesting inflation is unlikely to accelerate in coming months. Wages are still rising and have been higher than prices for the past year and a half. But Powell noted that wages are not rising fast enough to stimulate inflation.

A survey released Tuesday from the Federal Reserve Bank of New York shows that consumers expect prices to rise just 2.9% over the next 12 months, which would be the lowest level in nearly four years. Lower inflation expectations are important because when consumers expect milder price increases, they are less likely to act in ways that increase inflation, such as accelerating their purchases or demanding higher wages to offset higher prices.

Another potential source of relief for U.S. budgets is apartment rents. On average, they are now barely increasing nationally, according to real estate brokerage Redfin. The average rent in October was only 0.2% higher than a year ago, at $1,619, although that figure only reflects rents for new leases.

The rental prices charged by the government are rising faster because existing rental prices are included. Many landlords are still increasing monthly payments to reflect higher costs for new leases over the past three years.