The Federal Reserve’s preferred inflation measure moved up in October, with core prices climbing 2.8 percent over the past year, underscoring the lingering challenge of stubborn inflation despite months of cooling trends.
The personal consumption expenditures price index, which tracks changes in the cost of goods and services, rose 0.2 percent for the month. Stripping out volatile food and energy costs, the core index increased by 0.3 percent in October. Over the past 12 months, the overall index is up 2.3 percent, higher than the 2.1 percent year-over-year gain recorded in September.
These figures were in line with expectations, as economists had anticipated the 2.8 percent annual rise in core inflation, given the relatively predictable nature of the metric, which draws on earlier data releases.
The persistence of core inflation near 3 percent complicates the Federal Reserve’s decision-making as it considers further adjustments to interest rates. After making its first rate cut in September in response to what it saw as signs of economic slowing, the central bank now faces a dilemma: how to balance encouraging growth with ensuring inflation moves closer to its 2 percent target.
Recent months have seen progress on inflation plateau, raising questions about whether the Fed will pause additional rate cuts at its upcoming meetings in December or January. This hesitation reflects broader uncertainty about the trajectory of prices and the strength of the broader economy heading into the new year.
The return of upward pressure on inflation also raises questions about the prudence of the Fed’s large, 50-basis point cut in September and the follow-up 25-basis point cut in November. Critics say the Fed acted prematurely, risking pushing inflation higher by easing monetary policy too early.