US inflation slowed to 6.0% year-on-year in October, according to the Fed’s preferred index

The inflation slowed down in USA in October, at 6.0% year-on-year compared to 6.3% in September, and held steady in a month, at 0.3%, according to the index PCEthe favorite for fed and published on Thursday by the Department of Commerce.

In addition, households increased their income 0.7% in one month, a stronger increase than expected and higher than that of September (0.4%). They also accelerated their expenses, which are, as expected by analysts, rising 0.8% (compared to +0.6% in September).

The Federal Reserve of the US closely follows the slowdown in the inflation. However, it remained at a high level in October, which probably reinforces the intention of the fed to continue increasing the interest rates to cool the economy and stop the acceleration of prices.

Thursday’s report from the Commerce Department showed prices rose 6% in October from a year earlier. That was the smallest increase since November 2021 and was down from a 6.3% year-on-year rise in September. Excluding the price volatility For food and energy, so-called core inflation for the previous 12 months was 5%, down from 5.2% in September.

On a month-over-month basis, prices rose 0.3% from September to October. For core prices, the increase was 0.2%.

The report also showed that consumers spent more in October, even after adjusting for inflation, a sign of their continued willingness to keep spending in the face of high prices. Spending rose 0.8% from September to October, or 0.5% after accounting for price increases. At the same time, inflation-adjusted profit after tax increased 0.4%.

However, many Americans they are dipping into their savings to keep up with rising prices. The savings rate in October it fell to 2.3%, the lowest level since 2005.

In response to the worst inflation since the early 1980s, the Fed has raised its Reference rate six times since March, and its last four gains have been three-quarters of a point each. The central bank he hopes to engineer the difficult task of bringing inflation down to its 2% annual target without causing a recession in the process.

In recent months, inflation has eased from the four-decade highs it hit at the start of the year. And most economists expect aggressive Fed tightening to drive prices down further.

“We expect to see much more good inflation news in the coming months,” wrote Paul Ashworth, chief economist for North America of Capital Economicsin a research note.

On Wednesday, Fed Chairman Jerome Powell, said in a speech that the central bank could cut its rate hikes to a half-point increase when it meets in two weeks, a message that drew cheers from financial markets. At the same time, however, Powell made it clear that policymakers intend to keep his key rate, which affects many consumer and commercial loans, at a high level for an extended period.

The Fed’s series of aggressive rate hikes has made borrowing costs much more expensive across the economy. The housing market, in particular, has been hit by a year-long doubling of mortgage rates: previously occupied home sales have fallen for nine straight months. Many economists expect that USA fall into a recession next year as the effects of those higher loan rates take hold.

Meanwhile, however, the broader economy is showing signs of surprising durability. On Wednesday, the government estimated that the economy grew at a robust 2.9% annual rate from July to September. The labor market, the most important barometer of economic health, remains strong. Employers have added a healthy average of 407,000 jobs per month so far this year, and unemployment remains near a half-century low.

The Fed is believed to monitor the inflation gauge that was issued Thursday, called the Personal Consumption Expenditures Price Index, even more closely than the government’s better-known consumer price index. The government has reported that the CPI it rose 7.7% in October from 12 months earlier, down from June’s 9.1% year-on-year rise, which had been the biggest such jump in four decades.

The PCE index tends to show a lower level of inflation than the CPI. Partly because rents, which have skyrocketed, have twice the weight in the CPI than in the PCE.

The PCE price index also seeks to account for changes in the way people shop when inflation rises. As a result, you can capture, for example, when consumers switch from expensive national brands to cheaper store brands.

(With information from AFP and AP)

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