Inflation declined to 3.2% for the year ending in October, a welcome development as the Federal Reserve works to contain price increases.
The data reported on Tuesday by the Bureau of Labor Statistics in an update to the consumer price index are good news for President Joe Biden. Biden has been trying to reassure voters that inflation is getting under control, even as he is plagued by low economic approval ratings.
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It is also a welcome development for the Fed, which has desperately worked to drive down inflation since March 2022 by hiking interest rates as part of its historic tightening cycle.
On a month-to-month basis, inflation growth was flat at 0%, better than expectations.
“Core inflation,” which strips out volatile food and energy prices, fell to 4% for the year ending in October. Overall, core inflation has largely trended down this year, something that bodes well for the country’s economic outlook.
The central bank’s target rate is 5.25% to 5.50%, with the Fed last raising rates in July. The Fed has opted to keep rates steady since then as officials assess the various inflation, employment, and other economic reports.
Soaring inflation has made life much more unaffordable over the past couple of years and has undercut support for Biden and his economic plan. While the Biden administration has pointed to inflation slowing from its peak last year, Republicans have pointed out that price growth is still above the Fed’s 2% goal and inflation, when looked at from its pre-pandemic baseline, has exploded far beyond what is healthy.
Many in the GOP have blamed the price growth on pandemic-era spending that they contend overheated the economy and caused demand to explode, pushing up wages and prices. Meanwhile, many Democrats argue inflation has risen in other countries across the West and that the key inflationary drivers came not on the demand side but on the supply side.
Even amid the higher interest rate environment, other parts of the economy have remained quite robust.
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For instance, GDP growth accelerated to a 4.9% seasonally adjusted annual rate in the third quarter of this year, up from 2.1% the quarter before, the Bureau of Economic Analysis reported. That was above the expectations of economists who were forecasting a still-strong 4.2% increase.
The labor market has remained above water, although the most recent jobs report for October showed that it is starting to cool. The economy added just 150,000 jobs in October, less than most economists had projected and well below September’s gain of 297,000.
