WASHINGTON (AP) — Inflation in the United States ticked up in October, driven by costlier rents, used cars and air fares, a sign that price increases might be leveling off after having slowed in September to their lowest pace since 2021.
Consumer prices rose 2.6% from a year earlier, the Labor Department said Wednesday, up from 2.4% in September. It was the first rise in annual inflation in seven months. From September to October, prices edged up 0.2%, the same as the previous month.
Excluding volatile food and energy costs, “core” prices rose 3.3% from a year earlier, the same as in September. From September to October, core prices rose 0.3% for a third straight month. Over the long run, core inflation at that pace would exceed the Federal Reserve’s 2% target.
Most of the monthly increase in consumer prices reflected an increase in rents and housing costs, a trend that Fed officials expect to fade in the coming months. As a result, Wednesday’s figures could keep the Fed on track to cut its key rate for a third time in December, as its officials have previously indicated they likely would.
Most economists think inflation will eventually resume its slowdown. Consumer inflation, which peaked at 9.1% in 2022, has since fallen steadily, though overall prices are still about 20% higher than they were three years ago.
The price spike soured Americans on the economy and on the Biden-Harris administration’s economic stewardship and contributed to Vice President Kamala Harris’ loss in last week’s presidential election.
Yet Donald Trump’s victory has raised uncertainty about where inflation might be headed and how the Fed would react if it reaccelerated. Trump has vowed to reduce inflation, mostly by ramping up oil and gas drilling. But mainstream economists have warned that some of his proposals, notably his plan to substantially increase tariffs on imports and pursue mass deportations of migrants, would worsen inflation if fully implemented.
Stock prices surged in the wake of Trump’s election victory, mostly on optimism that his proposed tax cuts and deregulation would boost the economy and corporate profits. But bond yields also moved higher, partly reflecting fear that inflation could accelerate.
In addition, the economy is growing faster than many economists had expected earlier this year. It has expanded at nearly a 3% annual rate over the past six months, with consumers, particularly those with higher incomes, spending freely and fueling growth.
Gas prices fell 0.9% from September to October, helping to hold down overall inflation. Prices at the pump have since fallen further on average nationwide, to 3.08 a gallon on Wednesday, according to AAA. That’s down from $3.20 a month ago.