Consumer price index data released Thursday showed that inflation cooled more than expected in October, welcome news for the Federal Reserve and White House after months of limited progress on bringing down inflation.
While inflation is still rapid, it slowed notably last month. Consumer prices picked up 7.7% in the year through October, less than the 7.9% that analysts had expected, and down from 8.2% in the year through September. On a monthly basis, price gains climbed 0.4% between September and October, matching the previous month.
After stripping out food and fuel, both of which jump around in price, a “core” inflation index decelerated to 6.3% on an annual basis, down from 6.6% in the prior reading.
Despite some hints at slowing down, price increases had until now failed to stage a major drop-off: Inflation has more or less flatlined at an abnormally high level since spring. That has been bad news for shoppers, because it has meant that already high prices continue to climb with each passing month. For the Federal Reserve, which has raised rates rapidly this year to wrestle inflation back under control, it has been a sign that price increases could prove difficult to stamp out without a painful economic contraction.
That is why Thursday’s bigger-than-expected slowdown is likely to be especially welcome news.
Inflation is expected to remain rapid through the end of the year, but there are reasons to hope it could moderate even more meaningfully in 2023. Rent inflation is expected to slow at some point next year. Used car prices are beginning to decline. A variety of other goods could stop appreciating in price as supply chain kinks — present for much of the pandemic — fade.
Health insurance, which has been slightly adding to inflation, is beginning to slightly subtract from it because of the way it is calculated.
But there are also risks that could keep inflation elevated. A big question going forward is what will happen to prices for nonhousing services: airfares, pet care, child care, health care, manicures, meals out and the like.
Prices in those categories are closely tied to wage gains, which have been climbing swiftly in recent months. If that continues, it could be hard for inflation to fall the whole way back to the roughly 2% pace that was normal before the pandemic: Companies are likely to try to pass rising labor bills along to consumers in the form of higher prices.
This article originally appeared in The New York Times .