Consumer price growth is expected to further moderate over the coming year, though some economists expect the path back to the Fed’s inflation goal to include both a recession and a rise in the unemployment rate.
Inflation is affecting economies globally, spurring the world’s most aggressive and synchronized monetary policy tightening in 40 years and raising risks of a global downturn.
Shelter costs -- which are the biggest services’ component and make up about a third of the overall CPI index -- increased 0.8% last month, the most since 1990. The acceleration was fueled by the biggest jump in costs of hotel stays in more than a year.
Though private-sector data points to a stabilization -- or even decline -- in rents in a range of cities across the country, there’s a lag between real-time changes and when those are reflected in Labor Department data. Bloomberg Economics estimates the shelter-related components will crest in the next two to three months, then begin slowing.
Stripping out food, energy and shelter, the CPI dropped 0.1%, the weakest reading since May 2020.
While the Fed bases its 2% target on a separate inflation measure from the Commerce Department -- the personal consumption expenditures price index -- the CPI is closely watched by policy makers, traders and the public. Given the volatility of food and energy prices, the core index is generally considered a more reliable barometer of underlying inflation.
Excluding food and energy, the cost of goods decreased 0.4%, the biggest decline since March. Services prices less energy increased 0.5%.
Economists generally expect goods prices to continue to soften as a result of shifting consumer preferences, improving supply chains and lower commodity prices. However, services may keep upward pressure on wages and inflation for the foreseeable future.
A separate report Thursday highlighted how high inflation is depressing workers’ purchasing power. Real average hourly earnings decreased in October and were down 2.8% from a year earlier. After adjusting for inflation, annual wages have fallen each month since April 2021.
--With assistance from Augusta Saraiva, Chris Middleton and Liz Capo McCormick.
This article was provided by Bloomberg News.