U.S. inflation falls to 7.7% in October

Lavina Daryanani
Source: The Economic Times

The past few months have been typified by a rise in the cost of living and predictions suggestive of prolonged macro-economic uncertainty. Rising inflation numbers have been accompanied by rising interest rate announcements by most central banks around the world. The hawkish stance of most governments, in retrospect, has proven to be burdensome for consumers.

Of late, however, things seem to be improving. The The U.S. Bureau of Labor Statistics just released its Consumer Price Index numbers. Inflation for October dropped to 7.7%. The latest figure is relatively lower to the 7.9% prediction made by economists surveyed by Bloomberg News. Banks including JP Morgan Chase, Citigroup, Wells Fargo, and Deutsche Bank had similar projections.

Is the drop in inflation indeed an improvement?

Inflation for September dropped to 8.2%, the lowest since February this year. Even though the current number stands lower, it might not essentially be a big positive takeaway. Greg McBride—Chief Economist at FinServ company Bankrate—told CNBC,

“If we consider that improvement, it is setting a low bar. We’ve been head-faked multiple times, thinking we’re starting to turn the corner only to see inflation rise again.”

The crypto market, nevertheless, reacted positively. Right after the numbers were out, Bitcoin registered a 7.6% uptick in minutes and climbed above $17k. However, a brief retracement also followed.

Source: TradingView

Earlier this month, Chairman Jerome Powell said that the Federal Reserve had “ways to go” in bringing down inflation. That would likely be done via continued interest rate hikes to discourage spending.

Powell further expressed some pessimism about the future. He revealed that he now expected the “terminal rate,” or the point when the Fed would stop raising rates, to be higher than it was projected in the September meeting. He added,

“Policy needs to be more restrictive, and that narrows the path to a soft landing.”

However, there are chances for the Fed to now pivot, and today’s released numbers will single-handedly dictate its upcoming course of action during the next meeting.