Prices Shows Signs of Moderation in the U.S as Inflation Eased to 7.7 in October

Consumer prices started showing signs of cooling down in the month of October despite the persistent increase in commodity prices.

Consumer Price Index (CPI), which measures the inflation rate, grew at a slower pace of 7.7% in October, below the 8.2% recorded in September and 8% predicted by experts. On a monthly basis, inflation increased by 0.4%, according to the Bureau of Labour Statistics.

Core CPI that excludes energy costs and volatile food increased 0.3% in the month and 6.3% on yearly basis.

The slowdown in headline inflation was because of a 2.4% decline in the price of used vehicles. The price of used vehicles declined by 0.7%.

“The report overstates the case that inflation is coming in, but it makes a case inflation is coming in,” said Mark Zandi, chief economist at Moody’s Analytics.

“It’s pretty clear that inflation has definitely peaked and is rolling over. All the trend lines suggest that it will continue to moderate going forward, assuming that nothing goes off the rails.”

The stock market responded positively to the report with Dow Jones Industrial Average rising by over 1,000 points. Yield declined immediately with the policy-sensitive 2-year note moderating to 4.33%, a 0.3 percentage point decline.

“The trend in inflation is a welcome development, so that’s great news in terms of the report,” said Michael Arone, chief investment strategist at State Street Global Advisors. “However, investors are still gullible and they are still impatiently waiting for the Powell pivot, and I’m not sure it’s coming anytime soon. So I think this morning’s enthusiasm is a bit of an overreaction.”