CPI inflation data showed consumer prices rose 0.4 percent in October, with core prices up 0.3 percent, keeping inflation elevated before the Federal Reserve's Dec. 8-9 meeting. For households, that means the price backdrop remained sticky even after September's 0.6 percent increase, and it puts the next rate move squarely in focus.
Christopher J. Waller and 25 basis points
Christopher J. Waller said a quarter-point increase would suffice if price pressures improved, but he also said that if core inflation stayed at 0.3 percent or higher, the Federal Reserve risked its credibility by moving too slowly. He put the point bluntly: “Hiking only 25 basis points would put our credibility at risk, a risk I am not eager to take,”
0.4 percent in October was broad enough to keep pressure on policy, while the Bureau of Labor Statistics did not release year-over-year figures because it was unable to collect data during last year's government shutdown. The missing annual comparison forced outside calculations: overall prices were around 4 percent higher than a year earlier, and core prices were about 2.8 percent higher.
Food and energy in October
0.5 percent food inflation and 0.7 percent energy inflation did much of the work behind the monthly increase. Food prices were about 3 percent higher than a year earlier, while energy costs rose after a 5.2 percent jump in September, showing that the October reading was not just a one-off swing in one category.
1 percent gasoline inflation followed a 9.1 percent increase in the previous period, and electricity prices rose nearly 1 percent in October. Core services excluding housing climbed 0.4 percent and were rising at an annual rate of nearly 5.5 percent over the past three months, a gauge that matters because it strips out housing and captures a cleaner read on underlying price pressure.
Two-year yields at 4.67 percent
0.1 percentage points was the move in two-year Treasury yields on Tuesday, which rose to 4.67 percent as traders adjusted to the inflation report and the rate debate around the Federal Reserve. The increase suggests the market is still leaning toward a tighter path than a simple quarter-point move if inflation stays firm.
2 percent remains the Federal Reserve's inflation target as measured by the Personal Consumption Expenditures index, and that gap leaves little room for complacency if October's pattern holds into December. The hard readout now is whether the Fed chooses 25 basis points or something larger at its final gathering of the year on Dec. 8-9.
