CIBC's analysis of the October Consumer Price Index (CPI) report suggests a positive trend towards the Federal Reserve's inflation targets. The report indicates a slower rise in core inflation and a flat headline inflation, driven by deceleration in shelter costs and easing goods prices.
- Subdued Core Inflation: Core inflation increased by only 0.2% month-over-month, below market expectations, with the annual rate dipping slightly to 4.0%.
- Stagnant Headline Inflation: Energy price softness led to no change in headline inflation month-over-month, with a year-over-year drop to 3.2%.
- Moderation in Core Services: Shelter cost inflation, a significant component of core services, showed signs of easing, indicating the previous month's surge was an outlier.
- Persistent Non-Housing Services Prices: Non-housing services prices maintained a steady increase, a detail likely scrutinized by the Fed.
- Impact of Supply Chain Normalization: Continued normalization in supply chains and a decline in used car prices contributed to a slight decrease in core goods prices.
The October CPI report provides evidence of inflationary pressures easing towards the levels targeted by the Fed. Core inflation's steadiness around the target range since June may be reassuring for policymakers. However, the sustained rise in non-housing services prices warrants ongoing attention. CIBC suggests that the Fed may find comfort in these signs of progress, reinforcing the narrative of a cautious approach towards future rate hikes.