Inflation is up modestly but economists say not to fret
Inflation in the United States ticked up in October, driven by costlier rents, used cars and airfares — and came on the heels of price increases moderating in September to their slowest pace since 2021.
Consumer prices rose 2.6% from a year earlier, the Labor Department said on Wednesday, up from 2.4% in September. It was the first rise in annual inflation in seven months.
From September to October, prices edged up 0.2%, the same as the previous month.
Excluding volatile food and energy costs, "core" prices rose 3.3% from a year earlier, just as in September. From September to October, core prices rose 0.3% for a third straight month.
Over the long run, core inflation at that pace would exceed the Federal Reserve’s 2% target.
Most economists, though, think inflation will eventually resume its slowdown. It peaked at 9.1% in 2022 and has since fallen steadily, though overall prices are still about 20% higher than they were three years ago.
In the metropolitan area, consumer prices rose 4% last month, compared with October 2023, due in part to increases in the cost of energy, shelter, recreation and some foodstuffs, said William J. Sibley, regional commissioner for the federal Bureau of Labor Statistics, which compiles the consumer price index.
The largest price hikes, year over year, in the 25-county region that includes Long Island were for electricity and natural gas, up 17.4% and 14.5%, respectively. Residential rents climbed 5.1% in October, compared with a year earlier, and recreation was up 2.8%.
The cost of groceries rose 0.6% last month, compared with October 2023, led by rises for nonalcoholic beverages, dairy products and meat, poultry, fish and eggs.
These increases were partially offset by a steep decline in gasoline prices: down 16.5% from a year earlier. Also the cost of clothing and used automobiles were down 1.6% and 2.2%, respectively.
Steven Kent, an economics professor at Molloy University's business school, told Newsday: "We've seen a deceleration in inflation for quite some time, consumer confidence is very solid and the [recent] interest-rate cut all suggest that consumers are doing well. I don't think they should be concerned about a little one-month acceleration in the consumer price index."
Nationwide, price spikes soured Americans on the economy and on the Biden-Harris administration’s economic stewardship and contributed to Vice President Kamala Harris’ loss in last week’s presidential election.
Yet President-elect Donald Trump’s victory has raised uncertainty about where inflation might be headed and how the Fed would react if it reaccelerated.
Trump has vowed to reduce inflation, mostly by ramping up oil and gas drilling. But mainstream economists have warned that some of his proposals, notably his plan to substantially increase tariffs on imports and pursue mass deportations of migrants, would worsen inflation if fully implemented.
Most of the September-to-October increase in consumer prices reflected a rise in rents and housing costs, a trend that Fed officials expect to fade. As a result, Wednesday’s figures could keep the Fed on track to cut its key rate for a third time in December.
"Inflation is proving to be a little sticky, but not a big issue," said Ryan Sweet, chief U.S. economist at Oxford Economics, a consulting firm.
If the Fed reduces its key rate again in December by an expected quarter-point, he said, rates would have been cut by a full percentage point. He thinks the policymakers will then pause to gauge the effects of their rate cuts on the economy and inflation.
In addition, the economy is growing faster than many economists had expected earlier this year. It has expanded at nearly a 3% annual rate over the past six months, with consumers, particularly those with higher incomes, spending freely and fueling growth.
A survey released on Tuesday by the Federal Reserve Bank of New York found that consumers expect prices to rise just 2.9% in the next 12 months, the lowest such measure in nearly four years.
Lower inflation expectations are important because when consumers expect milder price increases, they’re less likely to act in ways that raise inflation, such as accelerating their purchases or demanding higher pay to offset higher prices.
With James T. Madore
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