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US inflation reached 2.6% in October, leading to discussions at the Federal Reserve about potential interest rate cuts before the end of President-elect Donald Trump’s term.
The Bureau of Labor Statistics reported a 2.6% growth rate, meeting economists’ predictions and surpassing September’s 2.4% rate.
When excluding volatile food and energy prices, “core” CPI remained at 3.3% annually. However, monthly core prices continued to rise by 0.3% for the third consecutive month, indicating persistent underlying inflation.
Alberto Musalem, president of the St Louis Fed, expressed concerns about inflation staying above 2% or increasing further, while noting a reduced risk of rapid deterioration in the labor market.
He reiterated his stance on gradual interest rate reductions.
Sarah House, senior economist at Wells Fargo, highlighted the challenge of controlling the remaining inflation, attributing it to the lasting impact of the Covid-19 pandemic and ongoing price pressures in services.
The Federal Reserve closely monitors inflation data, having already lowered the benchmark rate by 0.75 percentage points over two meetings to a target range of 4.5% to 4.75%.
Fed officials aim to establish a “neutral” rate setting to maintain inflation control without suppressing demand, in hopes of achieving a soft landing to avoid a recession.
Following Trump’s election, concerns about inflation resurgence have affected markets, leading to increased Treasury yields. However, yields slightly decreased after the latest data release, signaling a possibility of future interest rate cuts by the Fed.
Market futures suggest an 80% chance of a quarter-point cut in December, up from 60% prior to the inflation report.
Two-year Treasury yields, which reflect interest rate expectations, dropped by 0.06 percentage points to 4.28%.
House commented on the inflation figures, stating relief that they aligned with expectations and did not present any surprises.
The US stock market saw minimal movement, with the S&P 500 closing slightly higher and the Nasdaq Composite declining.
Despite recent retail sales data indicating ongoing consumer spending and a robust labor market, inflation has slowed its decline in recent months.
Monthly price increases were primarily driven by housing-related costs, while energy prices remained stable, and airline fares rose while clothing and furniture prices fell.
During a press conference, Fed Chair Jay Powell anticipated a gradual decrease in inflation over the next few years, aiming to reach the central bank’s 2% target.
Minneapolis Fed President Neel Kashkari expressed confidence in the downward trend of inflation.
However, the future path of inflation could be impacted by Trump’s policies, potentially leading to increased price pressures and economic uncertainty.
Mark McCormick of TD Securities warned that achieving a comfortable 2% inflation rate could be challenging under a second Trump presidency alongside strong economic data.
Powell emphasized that the Fed does not speculate on future policy changes, indicating that the recent election results will not immediately influence their decisions.
sentence: She ran to catch the bus before it left.
Rewritten: Before the bus left, she ran to catch it.