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U.S. Inflation Rises Less Than Expected

FILE: A woman shops in a supermarket as rising inflation affects consumer prices in Los Angeles. Taken June 13, 2022
FILE: A woman shops in a supermarket as rising inflation affects consumer prices in Los Angeles. Taken June 13, 2022

U.S. October inflation data came in lower than expected, driving investor expectations the Federal Reserve will be able to temper its aggressive program of rate increases.

The U.S. consumer price index [CPI] rose 0.4% last month after climbing by the same margin in September, the Labor Department said on Thursday. Economists polled by Reuters had forecast the CPI would advance 0.6%.

Excluding the volatile food and energy components, the closely-watched core CPI increased 0.3% last month after gaining 0.6% in September.

The consumer price index (CPI), a key measure of inflation, rose 7.7 percent from October 2021, easing from September's pace but still underscoring the heightened cost of living that have squeezed many households, the Labor Department reported.

While the annual inflation rate was the lowest since January and down from a harsh 9.1 percent in June -- the highest in 40 years -- latest figures are unlikely to bring quick reprieve from the Federal Reserve's ongoing interest rate hikes to cool the economy.

Sky-high inflation has caused the U.S. Federal Reserve, the nation's central bank, to raise rates aggressively this year, a process that has boosted the dollar and caused U.S. Treasuries and shares around the world to sell off sharply.

Hopes that the end could be in sight therefore caused these trends to reverse.

“(Federal Reserve chair) Jerome Powell and equity markets will breathe a sigh of relief that inflation is finally moving downwards and coming in below expectations. This gives the Fed room to slow the pace of their rate hikes," said Mike Bell, global market strategist at J.P. Morgan Asset Management.

Bell added "As inflation starts to moderate, we expect the Fed to continue raising rates to around 5% but then potentially pause to assess the effect that their recent rapid monetary policy tightening is having on the economy."

The CPI data overshadowed any market reaction from the U.S. mid-term elections, the outcome to which is still uncertain. Republicans are edging closer to securing a majority in the U.S. House of Representatives while control of the Senate is in the balance.

Information from Reuters and Agence France-Press was used to compile this report.