Inflation (Slightly) Eases

US inflation rose 7.7% year-over-year in October, down from 8.2% in September and lower than the 7.9% analysts had expected. The figure, released in government data yesterday, represents the smallest 12-month increase since January. See data breakdown here and historical data in charts here.

The decline in the consumer price index, a proxy for inflation that tracks the price of a basket of goods and services, is primarily driven by price decreases for used vehicles (-2.4%), apparel (-0.7%), and medical care (-0.6%). The core consumer price index, which removes volatile food and energy prices, rose 6.3% year-over-year in October, compared to 6.6% year-over-year in September.

The inflation rate, however, remains above the Federal Reserve's 2% target (see 101). Analysts expect the Fed to likely opt for a smaller 0.50% increase in interest rates next month to continue to curb inflation.

US stock markets rose the most since 2020 on the news (S&P 500 +5.5%, Dow +3.7%, Nasdaq +7.4%).