Data expected to show inflation continued in October

Even at its current high levels, inflation by some measures has begun to ease and is likely to continue to do so in the coming months.

WASHINGTON – The nation’s punitive inflation rate could continue to smolder in October, leaving the Federal Reserve with little reason to ease its efforts to slow price increases by steadily raising interest rates.

The Labor Department is expected to report on Thursday that consumer prices rose 8% from the previous 12 months and surged 0.6% from September to October, according to a survey of economists. FactSet data company. A separate measure known as core inflation, which does not include volatile food and energy costs, is expected to grow 6.5% over the past year and 0.5% from September to October.

Like many other countries, the United States is struggling to control inflation, which is weighing on millions of households and dampening the economy’s outlook as the Fed continues to raise borrowing costs for banks. businesses and consumers. The rise in inflation was unleashed by supply and labor shortages following the recession, by a boom in consumer spending fueled by massive federal aid and wage cuts. food and energy after Russia invaded Ukraine.

So far this year, the Fed has raised its benchmark interest rate six times by sizable increases, raising the risk that borrowing rates are seriously high — on mortgages, auto purchases and other expenses. other high costs – would push the world’s largest economy into recession.

Inflation was near a high on the minds of many voters in the midterm congressional elections that ended on Tuesday. Their economic worries contributed to Democrats losing seats in the House, although Republicans failed to achieve the major political gains many expected.

Even at its current high levels, inflation by some measures has begun to ease and is likely to continue to do so in the coming months. For example, most measures of workers’ wages show that strong wage growth over the past 18 months has stalled and begun to decline. While worker wages are not the main cause of higher prices, it could increase inflationary pressures if companies offset higher labor costs by charging customers more.

With the exception of automakers, still struggling to get the computer chips they need, supply chain disruptions have largely disappeared. Shipping costs have fallen back to pre-pandemic levels. Reserves of cargo ships out of the ports of Los Angeles and Long Beach have been cleared.

And as new rent declines that appear in real-time measures from sources like ApartmentList and Zillow begin to be recorded in upcoming government measures, that factor should also bring down inflation.

Even as many fear that the economy will slip into recession next year, the country’s job market is resilient. Employers added an average of 407,000 jobs a month, and the unemployment rate was just 3.7%, close to a half-century low. Employment opportunities remain at historic highs.

But the Fed’s rate hike has taken a toll on the US housing market. The average interest rate on a 30-year fixed mortgage has more than doubled over the past year, topping 7% before falling slightly last week. As a result, investment in housing collapsed in the July-September quarter, falling at a 26% annualized rate.

Higher mortgage rates have dampened sales. House prices are falling sharply from a year ago and are starting to fall monthly. The cost of renting new apartments is also falling.

However, given the way the government calculates housing costs, economists say house prices may have risen in October and inflated broad-based measures of inflation. The government measures the cost of all leases, including most existing leasehold leases. However, the rent requirement for new leases is decreasing.

And economists expect to see prices fall for many key commodities. Used cars, which skyrocketed in price last year as a shortage of computer chips sharply reduced new car sales, are expected to fall between September and October. Wholesale car prices have fallen. regularly but still not fully reflected in the retail price. Data expected to show inflation continued in October

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