On Thursday, the Federal Reserve and Americans received some positive inflation news.
For the year ending in October, the Consumer Price Index increased 7.7%, far less than the 8% that economists had predicted and the lowest annual inflation rate since January.
"Today's CPI report shows inflation is moving in the right direction," Eric Merlis, managing director and co-head of global markets at Citizens said. "The report provides ammunition for the Fed to begin pricing in sub-75-basis-point tightenings. This will be a welcome development for the Fed."
In response to the announcement, the stock market soared, with Dow futures rising more than 800 points on expectations that the Fed would scale back its aggressive rate hikes.
Although Fed Chair Jerome Powell stated earlier this month that the Fed still has "some ways to go" in its fight to control inflation, the mood is unmistakably shifting in favor of the possibility that the Fed may be able to lightly apply the brakes.
In contrast to the three-quarters of a percentage point rises the Fed announced at the previous four meetings, Fed funds futures are now pricing in a roughly 80% chance of a half-point increase at the December policymaking meeting.
Prices increased by 0.4% month on month. This compares to a 0.4% increase the previous month. Economists expected the monthly figure to rise because energy prices rose in October as a result of OPEC+'s decision to cut oil production and the lingering uncertainty surrounding Russia's war in Ukraine.
There appeared to be modest gains in another metric closely watched by the Fed: Core CPI, which excludes the more volatile categories of food and energy, recorded 6.3% for the year ended in October, down from 6.6% in September.
Core CPI rose 0.3% month on month. Both August and September had monthly gains of 0.6%.
The CPI figure on Thursday was an improvement following a run of hotter-than-expected inflation readings, but the pervasiveness of price hikes continues to be an issue for customers, businesses, and the Biden administration.
However, other data released by the Department of Labor on Thursday, Nov. 10, indicate that the battle against inflation is still far from over. These data, which point to a still-scarce job market, show a modest increase in the number of Americans who filed new unemployment benefit claims last week.
Nevertheless, the unusual positive inflation report prompted a Wall Street surge and drove down U.S. Treasury yields.