Inflation Report – What a Decrease!
The inflation report from September was an absolute letdown, giving little hope to the public that the situation would improve in time. Following that report, interest rates were hiked by 75 basis points once again, and this was worrisome because the globe is worried about the economic effects of these rapid rate hikes. We have learned that the Federal Reserve is willing to be extremely aggressive in order to bring down inflation, and they have accepted that hurting the economy is a possibility that might be necessary. As a result, the October CPI report held a lot of importance to everyone as the Fed would definitely keep an eye on this one as a tool to determine whether rate hikes should be slowed or not. More importantly, we haven’t seen a sign of this glaring issue cool for consumers, and the effects will only get worse.
This is why the reaction to the inflation report was so strong on Thursday. The Labor Department announced that the CPI increased by 7.7 percent from last year, a major slowdown from the 8.2 percent rise in September. This is the slowest rise in prices since January, and it marks major progress for the US. We all know core inflation is one of the most important statistics, and that even slowed down to a 6.3 percent increase from last year. The auto industry played a major part in this, with used car prices falling by 2.4 percent in the last month after being one of the biggest risers during the pandemic. When it comes to gas prices, we saw a monthly rise for the first time in a few months with consumers paying 4 percent extra at the pump, but economists don’t expect it to be as volatile as it was for most of this year. The other volatile area, food prices, rose by a minimal amount, matching numbers from December of last year. Because of the report, the market had its best day in more than 2 years with the indices rising by as much as 7 percent. Investors were relieved to see meaningful progress take place, and the Fed has to be considering a 50 point hike now. However, sustained progress must be made, which will keep our eyes on the November CPI report next month.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.