Milder inflation could put brakes on US rate hikes
US consumer prices were unchanged in October amid lower gasoline prices, and underlying inflation showed signs of slowing, supporting views that the Federal Reserve was probably done raising interest rates. The unchanged reading in the consumer price index reported by the Labour Department's Bureau of Labor Statistics (BLS) on Tuesday followed a 0.4 percent rise in September. In the 12 months through October, the CPI climbed 3.2 percent after rising 3.7 percent in September. Economists polled by Reuters had forecast the CPI gaining 0.1 percent on the month and increasing 3.3 percent on a year-on-year basis. Though year-on-year consumer prices have come down from a peak of 9.1 percent in June 2022, the disinflationary trend has stalled somewhat against the backdrop of a strong economy that is being powered by a relatively tight labour market. Inflation is running above the Fed's 2 percent target. Financial markets and most economists believe that the US central bank's monetary policy tightening campaign is over, a narrative that Fed Chair Jerome Powell and other policymakers have pushed back against. Powell said last week that "if it becomes appropriate to tighten policy further, we will not hesitate to do so."  Since March 2022, the Fed has hiked its policy rate by 525 basis points to the current 5.25 percent-5.50 percent band. Excluding the volatile food and energy components, the CPI increased 0.2 percent amid higher costs for rental housing. The so-called core CPI had risen by 0.3 percent for two months. With the October release, the BLS implemented changes to the methodology it uses to calculate health insurance prices, which boosted costs. The old method was based on an annual calculation using aggregated health insurance premium and benefit data. There were concerns about the volatility in the annual data and the lag involved in incorporating the health insurance financial data. The new method introduces smoothing to the health insurance index to reduce the volatility and also incorporates semi-annual financial data, which will shorten the lag in the index by six months. The BLS will update retained earnings every six months using half-year data and will calculate a two-year moving average to smooth the changes in retained earnings. The core CPI advanced 4.0 percent on a year-on-year basis in October after increasing 4.1 percent in September. (Reuters)