U.S. Inflation Rises Marginally In October

Weak gasoline prices impacted headline inflation in October, the Labor Department reported on Wednesday.

The Consumer Price Index, which measures inflation, climbed 0.1 percent in October following a 0.5 percent jump in September.

On a yearly basis, consumer prices dropped from 2.2 percent in September to 2 percent in October. Even though rents and healthcare costs rose, a drop in gasoline prices subdued headline inflation. Gasoline prices dropped by 2.4 percent in October, down from an 8-year high of 13.1 percent increase recorded in September due to the hurricanes.

However, core consumer prices excluding energy and volatile food climbed 0.2 percent in October, better than 0.1 percent in September. This is the highest increase since January and suggested that underlying price pressures are beginning to build up as projected by Federal Reserve.

The core CPI gauge rose 1.8 percent year-on-year, up from 1.7 percent.

Experts believe the increase will further solidify the Fed’s December rate hike position, especially with retail sales growing and the labor market absorbing more workers at a 3 percent economic growth rate.

“The Fed has struggled this year in determining if the slowdown in core inflation has been due to a confluence of one-offs or more persistent disinflationary forces,” said Sarah House, an economist at Wells Fargo Securities in Charlotte, North Carolina.

“The pickup clears the way for a December rate hike and supports the case for continued tightening in the year ahead.”

The odds of the Fed raising rates in December rose from 91 percent prior to the release to a 93 percent chance after this report.