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U.S. CPI falls to 9-month low in October, bolstering rate hopes

AuthorGeoffrey Smith
Published 11/10/2022, 08:28 AM
Updated 11/10/2022, 08:42 AM
© Reuters

By Geoffrey Smith 

Investing.com -- The annual rate of inflation in the U.S. fell by more than expected in October, indicating that the worst of the post-pandemic price spike is over and bolstering hopes of an early end to the current cycle of interest rate increases.

Consumer prices rose 7.7% from a year earlier, down from 8.2% in September and clearly below the 8.0% consensus forecast. The current dynamic in prices also eased more than expected. with overall prices rising only 0.4% on the month, down from 0.6% in September, and core prices - which strip out volatile food and energy elements - rising 0.3%, rather than the 0.5% expected. 

The headline rate of inflation has now fallen for four months in a row, from a peak of 9.1% in June. At 7.7%, it's now at its lowest rate since January. 

Financial markets reacted strongly to the news. The market had been forced by Federal Reserve Chair Jerome Powell after the central bank's last policy meeting to expect that it would keep rates higher than thought for longer than thought. The CPI numbers triggered a rapid reappraisal of that scenario. 

The dollar index fell 1.5% to trade at 108.78, its lowest in nearly two months. S&P 500 Futures meanwhile leaped by 3.2%, and Nasdaq 100 Futures by 4.2% in revived anticipation of a major turning point in the cycle.

"After the November FOMC meeting, the market was priced for a terminal rate of ~5.2% in June 2023 (higher for longer)," said Eric Basmajian, CEO of EPB Research, via Twitter. "After today's CPI miss, the market moved to 4.93% in March 2023 (lower for shorter)."

"Inflation turned down because core goods inflation finally turned strongly negative," said Peterson Institute fellow Jason Furman.

Inflation in core services also turned down, having trended up markedly in recent months. That was due in part to the lagged effect of price adjustments for health insurance, Furman said, although he also noted that the steam also appeared to be going out of new rent agreements in the housing market. As such, he argued that shelter costs - which accounted for half of the rise in the all-item index, were overstating the current reality of inflation by around 0.2 percentage points.

Latest comments

if CPI news falls than which pairs will goes down ?
Excluding Food and Energy. lol They count everything else. Food and Energy is purchased on daily basis and is the reason why it hurts people. Beautifully the price of energy and food just went up. lol More inflation to come.
Funny, the crude is rising again from 9-month low
Not to mention, weaker dollar will spike commodities and crude oil. Meaning higher inflation for November CPI we get in december😉
FED is clearly in pressure now that midterm election is over. Politicians wont care anymore. They got what they wanted
For the most part, prices will NEVER go down unless we have deflation. So the outrageous prices we are paying for consumer goods are now inflating only slightly less.
this are just manipulated numbers... reality is that not only Fed but all government across the world willing to suck everyone's life...this is just a starting
Reality- Consumer C.C debt is at a all time high. Housing Market is getting crushed. Interest rates 7%. Layoffs just starting to begin. Consumer savings have crashed. Bar is set low fir quarterly estimates and many companies still missing. This will not end well.
More propaganda bs. Dont see it cheaper on gas, food or bills 😡
Even with all the good news...Yield curve inversion still in effect 3MO yield 4.1598% 10 YR yield 3.854% LOOK OUT BELOW!
So ignore everything we need to survive like food housing and energy and hey presto it's gone down!
why the usd is down after very good reports of CPI????
The only 1-key use to measure inflation is gas price. Because food price is unstable and always go up fast, usually 100% plus plus. Lol
More evidence of a soft landing. This is how competent government steers a country through crises.
Democratic presidents always spend their first 2 years cleaning up the messes caused by Republican presidents.
jerome powell is not the president, so your partisan comment makes no sense
I apologize. I thought when you were commenting about government competence you meant people in government.
This goes to show you how incompetent our go wrnmebt is woth the swings we aur economy up and down and there n it wven close. Stupid libs
The government reports on inflation which influences their borrowing costs and their ability to continue with their reckless spending. Nothing wrong about that, especially since just recently some in government were getting concerned about their borrowing costs.
What would it be if it were measured in 1995 calculations?
So what if stocks go up. We're still heading into a recession and inflation is still very high. More downside coming.
This is a joke. If inflation was at 30% and dropped to 29% that would be reason for stocks to soar. C'mon...the 7.7% number is still terrible and likely based on a fudged CPI. Real inflation is much much higher and most people on Main St. are struggling. Great for Wall St. though!!
These stocks haven't even begun to imagine negative revenues or mass layoffs. This is not the bottom. But for the next couple days, there should be a nice little rally.
This data is clearly manipulated. It truly does not represent true inflation. But for the market it is party time. Do not get too optimistic folks.
 Cracks are appearing so FED needs and excuse to pivot. Simple!
All data obviously indicates slowing inflation. More relevant are two points, not reported on nearly enough: 1. Core inflation reading down to 0.3-0.4 is quite a bit lower than expectations and, most important, 2. The Core inflation metric used by the Fed includes a misleading and very lagged calculation of shelter inflation. Anyone paying attention to housing already sees that it’s falling, but the shelter inflation reading is still showing an outdated rise. Meanwhile, shelter is approx. 40% of the core inflation print. (See Jeremy Siegel et al for more info). In short, core inflation is now MUCH lower than expectations.
funny how everyone shouts about the lagged shelter inflation now house prices are falling, but were quite when prices were up 20% last year. and seemingly everyone knows it but non can perdit it? who are these people who's estimates everyone follows and why do they know anything?
The price of real estate may be falling due to increased rates. What this has done is send the cost of rentals even higher.
 Great point!
Economy is going depressed with ~6% sticky inflation but market is celebrating popping up 2000000000000 dollars of market cap in a minute.
just like market was dumping 20000000000 when jobs numbers were great median salary increasing faster than inflation etc. Market is forward thinking and celebrates trend
🤣🤣🤣 fake numbers!
how you can say any explanation
go to the grocery store. Moat items are at more than 20% increase. Gas, housing etc also up way more than 10% so overall this is only good for a temporary market rally imo.
rate pause is the best the market could hope for powell has the conductor hat on and its full steam ahead
feds will pivot this time
Nothing to get excited about. 7.7% is still bad and shouldnt be celebrated.
Sorry for your puts
Short sellers nightmare
Quite the opposite, loading up slowly on Shorts for 2023 while you bulls stay losing money
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