The October CPI report strongly implies a soft landing for the American economy.
Disinflation inside the October consumer price index caused by falling commodity, oil and gasoline prices resulted in no increase in inflation on the month and an easing in the year-over-year aggregate to 3.2%. More important, key services like transportation and airfares experienced outright declines on the month, which facilitated a 0.2% increase in core inflation on the month and 4% on a year-ago basis. Sustained improvement in the overall inflation outlook underscores our view that the Federal Reserve will remain on pause at its December policy meeting and should be done hiking rates as the economic expansion continues. From a policy perspective, the key components inside the monthly CPI report, released by the Bureau of Labor Statistics on Tuesday, revolves around the estimate of so-called super-core inflation, which increased by 0.2% on the month and 3.7% on a year-ago basis. Those increases imply further relief across the real economy around wage pressures. Read more of RSM’s insights on the economy and the middle marke In addition, the pace of service sector inflation, which comprises 61.76% of the overall index, increased by 0.3%, and the pace of inflation in shelter, which makes up 34.86% of the index, increased by 0.3%, or half of the 0.6% posted in September. The three-month run rate on both services and shelter has eased to just over 4%, which should buttress the argument of those at the Federal Reserve to remain on hold as the economy, hiring and inflation cool into the end of the year.