US Inflation Slightly Below Estimates

Customers pump gasoline into their cars at a gas station in the Bronx, New York, on June 1, 2018. DON EMMERT/AFP/Getty Images

WASHINGTON—Consumer prices rose in October slightly below consensus estimates, potentially easing some worries that higher inflation could lead the Federal Reserve to take a much more hawkish stance on interest rates.

The core Consumer Price Index advanced 0.19 percent on a monthly basis last month, according to the Bureau of Labor Statistics. The consensus estimate was a monthly reading of 0.20 percent or higher, according to a Citi report.

This brought the annual inflation rate to 2.1 percent in October, after advancing 2.2 percent in September.

The main driver of inflation was the rise in the cost of gasoline, accounting for over 1/3 of the increase. The advances in the cost of rent, used cars and trucks, and electricity also contributed to October’s inflation. Food prices, in contrast, declined slightly last month.

The Federal Reserve, which has a 2 percent inflation target, left interest rates unchanged but signaled further gradual rate increases ahead after a two-day policy meeting last week. In its policy statement, the Fed noted that overall inflation was near 2 percent and the “indicators of longer-term inflation expectations are little changed, on balance.”

Overall inflation could slow in the months ahead due to a recent crash in oil prices, however, the odds of the Fed raising its benchmark rates in December are unchanged, according to Goldman Sachs.

Former Federal Reserve Chairman Alan Greenspan told Bloomberg Television that he is “beginning to see the first signs” of inflation in the United States.

“We’re seeing it basically in the tightening of the labor markets first, which, as you know, have gotten very tight now. We’re beginning finally to see average wages rise, and clearly there’s no productivity behind it,” Greenspan said.

With the unemployment rate falling to the lowest level in nearly 50 years, American workers have recently started to see their paychecks grow. Private-sector wages and salaries rose at an annualized rate of 3.1 percent in the third quarter, the biggest increase in a decade.