Investors have been celebrating recent inflation data, which showed both consumer and producer prices rising by less than expected in October. But it would be wise not to get carried away by a single month’s numbers. As markets ponder the Federal Reserve’s next move, it’s too soon to be sure that the pace of monetary tightening can be safely scaled back.
Consumer prices rose 7.7% in the year to October, down from 8.2% in September and the peak of 9.1% June. The new rate is the lowest since January, before Russia’s war on Ukraine roiled global energy and commodity markets. Stripping out the cost of energy and food, so-called core CPI inflation is lower, and also falling — to 6.3% from 6.6% in September. The report made investors more confident that the Fed’s next hike in interest rates will be only 50 basis points, ending its recent run of 75-point increases.