October Inflation - Comin' in Hot!

Consumer prices (CPI) increased 6.2% year-over-year, higher than forecast, and marking the highest level since 1990.  In October, the consumer price index (CPI) increased 6.2% compared to the same period a year ago.  Expectations ranged from 5.4% to 6.0% with a median of 5.9%.  Core CPI (excludes food and energy) increased at 4.6% year-over-year.  The increase was broad-based, with higher prices for energy, shelter, food, used cars and trucks, and new vehicles among the larger contributors.  Higher consumer prices on the heels of higher producer prices (PPI) driven by increased commodities and wage costs, is evidence that companies have broadly been able to pass higher input costs on to consumers.

Consumer prices (CPI) increased 0.9% month-over-month, higher than forecast.  In October, the consumer prices as measured by CPI increased 0.9% compared to September.  Expectations ranged from 0.4% to 0.7% with a median of 0.6%.  Energy, in particular fuel oil, and vehicles were among the larger contributors.  Core CPI (all items less food and energy) rose 0.6%.

We continue to believe that elevated inflation levels will moderate somewhat in 2022 and further in 2023, but the combination of supply chain disruptions and higher input costs (commodities and wages) are driving more persistent inflation than was originally anticipated by economists and policymakers.  With unemployment at 4.6%, the Fed has already started taking steps that will help to manage elevated price increases over time.  Policymakers moved to begin tapering asset purchases this month, eliminating them altogether by the middle of next year.  In January, policymakers were not anticipating any rate increases until after 2023, but as of September, dot plots showed expectations for one hike in 2022 and markets are pricing for two.