Prices kept climbing in October, with overall consumer costs up 0.4 percent from the month before and core prices rising 0.3 percent, leaving inflation uncomfortably hot before the Federal Reserve meets in December.
The latest CPI inflation data matters now because it arrives just as traders are trying to guess whether policymakers will choose a quarter-point move or something bigger. Two-year Treasury yields rose to 4.67 percent on Tuesday as investors increased bets on more rate increases, and Christopher J. Waller gave that debate a sharper edge when he said a smaller move could damage the Fed's standing.
Waller said a quarter-point increase would be enough if price pressures improve, but he also warned that “Hiking only 25 basis points would put our credibility at risk, a risk I am not eager to take,” a line that underlined how little room the Fed has to look timid. The report showed food prices rose 0.5 percent in October and about 3 percent from a year earlier, while energy prices rose 0.7 percent after a 5.2 percent jump in September. Gasoline rose 1 percent and electricity nearly 1 percent, keeping pressure on households in the parts of the budget they feel most quickly.
The broad measure was only part of the story. Core services excluding housing rose 0.4 percent in October and nearly 5.5 percent at an annual rate over the past three months, a pace that suggests the Fed's fight against inflation is still not settled even if some headline figures ease from one month to the next. The Bureau of Labor Statistics did not release a year-over-year October reading because it could not collect data during last year's government shutdown, so calculations by put overall prices around 4 percent higher than a year earlier and core prices about 2.8 percent higher.
That leaves the Fed heading into Dec. 8-9 with a familiar problem: inflation is still running above its 2 percent target, even though the central bank measures that goal with the Personal Consumption Expenditures index rather than CPI. A quarter-point move may still be enough if price pressures cool further, but the October numbers make a larger increase harder to dismiss, and the final decision now turns on whether officials decide the recent moderation is real or just another pause in a stubborn inflation fight.
