US inflation slowed in October.
The consumer price index rose 7.7% year on year in October, the smallest annual increase since the start of the year.
The figure is below the 8% forecast by economists and down from 8.2% last month.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
This reading suggests inflation might have peaked, taking pressure off the Federal Reserve, America’s central bank, which has been trying to combat rising prices by hiking interest rates.
Currently, interest rates in the US sit at 4% after a 0.75% hike last week, their highest level since early 2008.
While Federal Reserve chair Jerome Powell has warned that rates will need to rise further to curtail inflation, the slowdown has ignited speculation the Fed will slow the pace of increases in the coming months.
Why did US inflation decrease?
A lower than expected rise in rent and housing costs was the main reason for the slowdown in US inflation last month.
That said, the property market in the US remains hot, so it could take some time before prices come down sustainably.
Car prices, costs for clothes, medical care and airline fares all declined. The price of food has also stopped rising as quickly as it was before and energy prices in the US have been lower than in Europe, as it’s far less reliant on foreign gas and oil.
However petrol prices did increase slightly, and restaurant prices and hotel rates also remain high.
UK inflation figures are due out 16 November, however the latest data from the Office for National Statistics showed today the economy shrank 0.2% as we head towards a recession.
How did the markets react?
Investors welcomed the figures, with share prices rising in the US, Europe and Asia.
The S&P 500 index rose 5.5% after the data was published, and the Nasdaq Composite index closed 7.4% higher.
Hong Kong’s Hang Seng index rose 5.5%, China’s CSI 300 index gained 1.9% and Tokyo’s Topix index 1.8%.
In Europe the Stoxx 600 gained 2.7%, while the FTSE 100 and the FTSE 250 gained 1% and 3.9% respectively.
The dollar fell 2.3%, while sterling jumped over three cents to $1.17.
-
Stock market turmoil: ‘Should I move money out of investments and into cash instead?’As global stock markets go into turmoil over Trump tariffs, you may be wondering if your money is safe or whether you should sell your shares and move to the so-called safety net of cash accounts
-
Why French far-right leader Marine Le Pen has been banned from running for officeMarine Le Pen, presidential candidate and leader of France's right-wing National Rally party, has been barred from standing by the country's judges.
-
America is in deep denial over debtThe downgrade in America’s credit rating was much criticised by the US government, says Alex Rankine. But was it a long time coming?
-
The debt ceiling illustrates America’s empire of debtOpinion The US has never quite got the hang of the conquering business as the debt ceiling debate shows.
-
US inflation falls to the lowest level in two yearsNews The rate of CPI inflation in the US slowed to its lowest rate since April 2021, suggesting the Federal Reserve’s rate hikes may be coming to an end.
-
Is US inflation accelerating again? Figures suggest the Fed has further to goNews The latest US inflation figures suggest inflation is not falling as fast as analysts had predicted. It could even be speeding up again.
-
Federal Reserve raises interest rates by 0.5%News The latest hike by the Federal Reserve takes the US benchmark rate to 4.25% - 4.5%.
-
Federal Reserve hikes interest rates to 4%News The Federal Reserve continues its battle with inflation with another bumper interest rate hike.
-
US inflation remains higher than expectedNews US inflation fell by 0.1% but remains higher than expected due to the rising cost of food, shelter and medical care.
-
US stimulus checks – will you get one?News To help fight high inflation and financial hardships, some US states have started to send stimulus checks to support residents. Here’s what you need to know.
