US inflation – progress stalls

The data...

US consumer prices rose 0.2% in October from the previous month. The year-on-year rate rose from 2.4% to 2.6%. The more important core rate, which excludes the volatile prices of energy and food, was 0.3% month-on-month. The year-on-year rate remained at 3.3%. The data were in line with expectations.

... and the background

The US consumer price data for October is not disastrous, but it does not show any clear progress either. This applies in particular to the core rate, i.e. the inflation rate excluding volatile energy and food prices, which provides a better indication of the trend. Here, the month-on-month rate was 0.3% (the overall rate was only 0.2% due to falling gasoline prices). This was the same as in August and September and too high given the Fed's inflation target.

In fact, consumer prices excluding energy and food rose at an annualized rate of 3.6% in the last three months, which means that momentum picked up again. However, there have been several such phases in the past. These proved to be only temporary and the year-on-year rate therefore tended to fall further. We would therefore not yet proclaim the end of the downward trend in inflation this time either. However, it remains to be seen whether the situation will ease again this time. In any case, the figures support our assessment that US inflation will remain above the central bank's target over the longer term. This applies even more in light of the emerging policy of the future president, Trump, who is relying heavily on tariffs and reduced immigration which would lead to a tightening of the labor market.

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