Inflation surged in October as consumers bought cheaper, less valuable goods

WASHINGTON — Inflation surged in October as measured by a nationwide gauge as consumers traded down on some purchases and paid more for some goods and services, according to a Labor Department report on Thursday.

Core inflation, which excludes food and energy but is still closely watched by analysts, rose 2.7 percent in October compared with the same month in 2017. Core prices also rose, by a modest 0.1 percent in October from September, on an annual basis.

At the same time, the Consumer Price Index jumped by 0.5 percent in October, an increase that, if it were sustained for the remainder of the year, would represent a notable acceleration from the 2.2 percent annual gain posted in 2018 and would mark the highest annual increase in the CPI since 2012.

The Fed has closely watched the CPI and similar gauges in its determination of whether to adjust interest rates in response to broader price pressures from a slowly rising economy and steadily rising wages.

“We think that inflation could stay above the Fed’s 3 percent target throughout 2019 unless there are signs of slowing global growth,” said Ellen Zentner, chief U.S. economist for the investment firm Morgan Stanley.

The price of gasoline, which increased by 3.6 percent in October, was a major factor behind the price increases registered by the CPI. However, food costs rose by 0.1 percent, indicating that food prices had been restraining price pressures for several months, suggesting they could now start moving higher.

Inflation excluding food and energy rose 0.2 percent in October, in line with the gain recorded in September. The CPI and core CPI are still running below their long-run averages.

Because inflation has risen for four straight months, investors have pushed up the yield on the 10-year Treasury note to near 3 percent, higher than the 2.8 percent at the start of the year.

Meanwhile, many analysts do not think a rate hike would be in the cards for March when the central bank’s policymakers meet.

“Our big takeaway is that we continue to believe that the FOMC is going to wait for at least one more inflation reading before making a move,” Zentner said.

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