US Inflation Hits Lowest Since July, Fueled by Petrol Price Drop

In October, a decline in gasoline prices played a key role in driving US inflation to its lowest level since July, with prices rising at a rate of 3.2% over the past 12 months, according to the Labour Department. This marked a decrease from the 3.7% recorded a month earlier. While housing costs continued to rise, overall price pressures were milder than anticipated, suggesting progress in the country’s battle against inflation.

The price index, measuring a basket of items, remained unchanged from September to October. Excluding volatile food and energy prices, the index showed a 0.2% increase, a slowdown from the previous month. This news prompted a surge in stocks as investors speculated that the US central bank may not need to take further measures to curb inflation.

The Federal Reserve, having raised interest rates significantly since the previous year to stabilise surging prices, is now seen as less likely to increase borrowing costs again due to the relatively mild inflation. Greg McBride, Chief Financial Analyst at Bankrate.com, noted, “The continued moderation of inflation will help keep the Federal Reserve on the sidelines.”

Although petrol prices have fallen over 5% since last year and new and used car prices have also decreased, housing costs, responsible for over 70% of inflation last month, remain a concern. Despite the moderation in overall inflation, McBride emphasised the ongoing strain on household budgets, with the Consumer Price Index rising over 18% in the past three years.

Analysts anticipate a slowdown in housing cost increases in the coming months as private sector measures indicate stabilising or falling rents. However, caution prevails, with Sarah House, an economist at Wells Fargo, warning that the steady rate of primary rent inflation suggests a potential slowdown that might not be as sharp as private sector measures indicate.