Federal Reserve Bank of Cleveland: October Inflation Data Shows Moderate Core Inflation
Published November 14, 2023
The Federal Reserve Bank of Cleveland has released its latest inflation data for October, which highlights continued, though moderate, inflationary pressures. The key inflation measures, including the median and trimmed-mean Consumer Price Index (CPI), indicate that while inflation remains elevated, there are signs of gradual moderation in certain sectors.
Key Inflation Measures for October
- Median CPI: The median Consumer Price Index (CPI) increased by 0.3% in October. This measure reflects the middle point of price changes across all categories and is a crucial indicator of core inflation, excluding the most volatile price fluctuations.
- Trimmed-Mean CPI: The 16% trimmed-mean CPI, which excludes the most extreme price movements in the data, rose by 0.2% in October. This index provides a more stable view of inflation by removing outlier items like food and energy.
Both of these core inflation measures exclude the highly volatile food and energy sectors, which can experience significant month-to-month fluctuations.
Year-Over-Year Inflation Trends
- Median CPI: On a year-over-year basis, the median CPI rose by 5.3%, a slight decrease from the previous month’s 5.5%. This suggests that while inflation is still high, there is a modest deceleration in price increases.
- Trimmed-Mean CPI: The 16% trimmed-mean CPI saw a year-over-year increase of 4.1%, down from 4.3% in September. This reflects a similar trend, with inflation moderating slightly.
- CPI Less Food and Energy: This broader measure of core inflation, which excludes food and energy prices, rose by 4.0%, down from 4.1% in the prior month. The decrease is a positive sign, showing some easing in overall price pressures.
Core PCE Inflation
The Personal Consumption Expenditures (PCE) price index, another key inflation metric closely monitored by the Federal Reserve, rose by 3.7% year-over-year in September. This represents a slight decrease from the 3.8% increase observed in August, further indicating a small but steady reduction in inflationary pressures.
Sector-Specific Price Changes
- Motor Fuel: A notable drop in motor fuel prices helped to moderate overall inflation. In October, motor fuel prices decreased at an annualized rate of 45%, which significantly eased inflation in the transportation sector.
- Rent and Owner’s Equivalent Rent: Housing-related costs, particularly rent, remain high and continue to exert upward pressure on inflation. However, there are signs that these costs are beginning to ease, which could help reduce overall inflationary pressure in the housing market.
Conclusion
The latest data from the Cleveland Fed shows that while core inflation remains elevated, there are signs of gradual moderation in certain areas. The sharp decline in motor fuel prices has helped to temper inflation in the transportation sector, while rent and housing costs continue to be significant contributors to inflation. Overall, the trends suggest that inflationary pressures may be easing, albeit slowly. These developments could influence future decisions by the Federal Reserve regarding monetary policy and interest rates as it seeks to balance the ongoing fight against inflation with the need to support economic growth.