Annual inflation slowed to 7.7% in October, the Bureau of Labor Statistics reported Thursday, a sign that the price pressures that have wracked the economy over the past year may be starting to ease.
The much-anticipated numbers revealed that, while inflation is still painfully high, it may be starting to cool in response to the Federal Reserve’s aggressive interest rate hikes. Inflation had been 8.2% the month before.
“Core inflation,” which strips out volatile food and energy prices, also eased by three-tenths of a percentage point to 6.3%.
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“The monthly and annual rates of increase in the consumer price index both came in lower than expected, with the 7.7% annual rise in the CPI the lowest since January. But if this constitutes improvement, we’ve set a very low bar,” said Greg McBride, chief financial analyst at Bankrate.
The Thursday morning report is the first such CPI reading after the midterm elections this week, in which Republicans appear poised to take control of the House while the Senate is still up in the air. The soaring inflation has eaten into President Joe Biden’s approval ratings.
“Today’s report shows that we are making progress on bringing inflation down without giving up all of the progress we have made on economic growth and job creation. My economic plan is showing results, and the American people can see that we are facing global economic challenges from a position of strength,” Biden said after the report’s release.
Consumer prices have been rising fast since last August, especially for staples such as food and gas.
The higher prices are hitting consumers hard. The rising cost of food, in particular, has been difficult for many households. The price of chicken has risen 14.5% over the last year, while dairy products have increased by more than 15%. Meanwhile, energy prices have risen by nearly 18% just in the past year, and people in many places, especially in cold New England, are facing the prospect of major bills heating their homes this winter.
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The Fed has been aggressively jacking up interest rates to tame inflation. Driving up interest rates slows demand and can result in recessionary conditions. Earlier this month, the central bank conducted a huge rate hike to the tune of three-quarters of a percentage point, or 75 basis points. It was the fourth such increase in just five months — a historic pace of increases.
The more-positive-than-expected Thursday reading means that the Fed will likely feel as though its rate hikes are working — a welcome development for the markets. Still, many economists predict that the economy will enter a recession in the coming months, given the aggressive pace at which interest rates have risen this year.
