11/10/2022: October Inflation is Lower than Expected

Core CPI dropped to 0.3% MoM

October CPI report is out. We are finally seeing some relief. Overall CPI rose 0.4% in October, as it did in September while the core CPI rose 0.3% in October vs 0.6% in September. Overall CPI YoY rose 7.7% in October vs. 8.2% in September. Core CPI YoY rose 6.3% in October vs. 6.6% in September. Overall, people are relieved that the core CPI came down after setting the highest record in September. Stock market indices jumped today. Dow went up 1200 points and SPY 0.00 was up 5%.

The energy index increased 1.8 percent in October after falling in the preceding three months. The food index increased 0.6 percent in October following a 0.8-percent increase in September. The shelter index continued to increase, rising 0.8 percent in October, the largest monthly increase in that index since August 1990 and was the dominant factor in the monthly increase for core CPI. Commodities, used cars, apparel and medicare prices are dropping. Natural gas prices went down 4.6%. Overall, the upward pressure of consumer prices seemed to be decreasing except for housing but hopefully it will self correct when the economy further cools down.

With this inflation report, people are expecting a smaller interest rate increase of 0.5 percentage point next month. “This morning’s CPI data were a welcome relief, but there is still a long way to go,” said Dallas Fed President Lorie Logan in a speech on Thursday. The probability that we are going to see crazy high interest rates like those in the 1970s is now lower.