Breaking: Inflation Continued to Plague U.S. Economy in October

Inflation continued to plague the U.S. economy in October as the Consumer Price Index, a reliable measure of the cost of everyday goods such as groceries, gas, and rents, rose 0.4 percent for the month, a 7.7 percent year-over-year increase, the Labor Department reported Thursday.

The numbers come days after a midterm election in which Republicans focused relentlessly on inflation, blaming the Biden administration and congressional Democrats for pouring government spending on an already hot economy coming out of the Covid pandemic. The messaging didn’t translate into the red wave that were some predicting, as control of both chambers of Congress remains up in the air as of Thursday morning.

News of the marginal jump in inflation has caused shares trading on international stock markets to drop and foreign investors to rush into the U.S. dollar. The exchange rate with the Japanese Yen hit an over three-decade high while the Euro broke a 20-year record.

Despite international skittishness, the small inflationary increase in October may be a signal that the Federal Reserve’s progressive ratcheting up of interest rates (which they have done six times this year) is achieving its desired result. October’s monthly inflation bump is an improvement relative to what Americans experienced in September and August.

Nevertheless, news of continued inflation may keep the Federal Reserve on track to raise interest rate until they can be certain the worst is behind them. Last week, the benchmark federal funds rate was increased by 0.75 percentage points in an attempt to continue the Federal Reserve’s anti-inflationary program.

“I think the story here is that there are many indications of inflation peaking and rolling over – such as supply chains, used cars, maybe wages – but they simply haven’t shown in the CPI report, so the question is: is today the day that all these indicators finally show up?” one chief economist of a Swiss Bank told Reuters.

Economists at the Federal Reserve are stuck in a tricky situation in which low unemployment rates are making their efforts to combat rampant inflation difficult.

"A strong labor market and strong job growth supports strong demand, which allows inflationary pressures to stay elevated…You've got more demand chasing goods and services, the supply of which is being impaired at the moment for a number of reasons," an economist at T. Rowe Price told the Wall Street Journal.

Also caught in the crossfire have been home sales that have continued to lag for eight months now as rising interest rates weighed down homeowners as housing prices have continued to stagnate.

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Inflation Continued to Plague U.S. Economy in October

The numbers come days after a midterm election in which Republicans focused relentlessly on ... READ MORE

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