Inflation was flat in October from the previous month, providing a hopeful sign that stubbornly high prices are easing their grip on the U.S. economy.
The consumer price index, which measures a broad basket of commonly used goods and services, increased 3.2% from a year ago despite being unchanged for the month, according to seasonally adjusted numbers from the Labor Deparrtment on Tuesday. Economists surveyed by Dow Jones had been looking for respective readings of 0.1% and 3.3%.
Headline CPI had increased 0.4% in September.
Excluding volatile food and energy prices, core CPI increased 0.2% and 4%, against the forecast of 0.3% and 4.1%. The annual level was the lowest in two years, down from 4.1% in September, though still well above the Federal Reserve’s 2% target.
Markets spiked on the news. Futures tied to the Dow Jones Industrial Average were up 300 points as Treasury yields fell sharply. Traders also took any potential Fed interest rate hikes almost completely off the table, according to CME Group data.
“The Fed looks smart for effectively ending its tightening cycle as inflation continues to slow. Yields are down significantly as the last of investors not convinced the Fed is done are likely throwing in the towel,” said Bryce Doty, portfolio manager at Sit Fixed Income Advisors.
The flat reading on headline CPI came as energy prices declined 2.5% for the month, offsetting a 0.3% increase in the food index. It was the slowest monthly pace since July 2022.
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