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US inflation rises by less than expected 7.7%

 (Shutterstock / Ryan DeBerardinis)
(Shutterstock / Ryan DeBerardinis)

Hopes that the global inflation spike might have peaked were given a boost today when it was revealed that US prices rose less than expected last month.

The US consumer prices index (CPI) rose 7.7% over the year to October compared with analysts’ forecasts of 8%. It was down from 8.2% in September.

The fall will bring relief tp financial markets and ease the pressure on the US Federal Reserve to put US interest rates by another 0.75%.

U.S. stock index futures surged on Thursday after data showed consumer prices eased more than expected in October, spurring hopes that the Federal Reserve might scale down the size of its future interest rate hikes.

Stuart Clark, portfolio manager at Quilter Investors, said: “Inflation in the US has once again fallen, giving some momentum to the idea that the worst is now behind us. The rate is lower than expectations and this will provide some relief to consumers and the wider market, however it is worth noting food and shelter is still increasing, so not completely out of the woods yet.

“Inflation also remains stubbornly high, however, and as such the Federal Reserve is going to remain in a hawkish mood for some time to come. The jobs market remains strong, so for as long as inflation is this elevated and the economy doesn’t completely grind to a halt, the market will have to wait for any indication of a pivot or pause from the central bank.

The encouraging data, which follows big falls in global gas prices, is another boost for President Biden following the Democrats’ better than expected showing in the mid-term elections.

In a statement Mr Biden said: “I will work with anyone – Democrat or Republican – on ideas to provide more breathing room to middle-class and working families,”

The Labor Department said the core rate of inflation, which excludes volatile food and energy prices, increased 6.3% on a year-on-year basis last month, down from 6.6% in September.

The report prompted traders to adjust their rate hike bets, with bets of a 50-basis point rate hike in December jumping to more than 70% from 45% before the data came in.