US Inflation Falls to 7.7% from 8.2%. What’s ahead for the Fed and the US Dollar?

U.S. inflation remained high last month but showed tentative signs of moderation, according to a report released this morning by the Bureau of Labor Statistics, a sign that the Federal Reserve is making some progress in the fight to restore price stability after launching the most aggressive tightening campaign since the 1980s.

The latest batch of data published this morning showed the consumer price index, which measures what Americans pay for a representative basket of goods and services, climbed 0.4% on a seasonally adjusted basis, bringing the annual rate down to 7.7% from 8.2% in September. Economists surveyed by Bloomberg had expected the headline print to clock in at 0.6% month-over-month and 8.0% year-over-year.



Looking at the monthly breakdown, gains in the all-items index were driven by a jump in energy, food, and shelter prices. These spending categories rose by 1.8%, 0.6%, 0.7%, and 0.8%, respectively. However, these increases were partially offset by declines in used vehicles and medical care costs, which fell 2.4% and 0.6%, correspondingly, during the period in question.

Excluding food and energy, the so-called core CPI, which strips volatile components from the calculation and is thought to reflect longer-term trends in the economy, advanced 0.4% month-on-month due to strong rental inflation. Compared to a year ago, this indicator cooled to 6.3% from 6.5%, two-tenths of a percent below estimates, suggesting that underlying price pressures are starting to cool more rapidly than initially envisioned.



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