Inflation was slightly slower than economists’ expectations in October.
Consumer prices inflation slowed again in October in the United States. According to the consumer price index published by the Ministry of Labor on Tuesday, the inflation rate was 3.2 percent in October.
In a preliminary survey by the news agency Bloomberg, economists estimated that inflation would have slowed down to 3.3 percent in October. Compared to September, consumer prices did not change at all.
Energy became cheaper in October by 6.2 percent from a year ago, but food became more expensive by 3.3 percent, services by 5.5 percent and housing by 6.7 percent.
The central bank and the core inflation closely monitored by economists was 4.0 percent, which was 0.1 percentage points slower than economists’ expectations. In August, core inflation was 4.1 percent.
Core inflation is an important measure because the direct impact of sensitively changing energy and food on consumer prices has been removed from it. It tells better about the wide range of inflation.
Fast in order to tame inflation, the central bank has tightened monetary policy 11 times within a year and a half. Last year, it resorted to an exceptionally large interest rate increase of 0.75 percentage points.
“Overall inflation and core inflation continued to slow down in October, but they are still faster than the central bank’s price stability target. The central bank hardly needs to raise the key interest rate anymore, but it will keep monetary policy tight until next year,” says the chief economist of the financial group OP Reijo Heiskanen.
The range of interest rates has been 5.25–5.50 percent since the summer. The last time monetary policy was as tight was in 2001.
Ripe inflation was in June last year, when the rate of price increase was 9.1 percent. According to the central bank’s price stability objective, inflation must be two percent on average over a long period of time.
The central bank’s open market committee, which decides on monetary policy, has kept the key interest rate unchanged in both November and September. Director general Jerome Powell however, has warned that inflation may turn out to be more persistent than anticipated.
“The new inflation data confirms our view that the central bank will no longer raise the key interest rate but will start cutting interest rates in May. However, this requires that the economy cools down significantly and unemployment increases,” says the chief strategist of the financial company SEB Jussi Hiljanen.
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