Fed Indicator Shows Inflation Slowed to 6% in October, Still Well Above 2% Target

According to the Federal Reserve’s preferred indicator, inflation decreased three-tenths of a percentage point to 6% yearly in October. The Washington Examiner reports that data from the Bureau of Economic Analysis on personal consumption expenditures (PCE) shows that inflationary pressures are easing because of the Fed’s efforts to slow price increases by boosting interest rates. However, households’ purchasing power is still heavily impacted by inflation, which is still running far faster than the central bank’s target.

Core PCE inflation, a less volatile measure of inflation that excludes the cost of energy and food, decreased by two-tenths of a percentage point to 5% year-over-year. Still well over the Fed’s 2% target. The report is the last before the Fed meets next week to decide how much to raise interest rates. The central bank has been dramatically tightening monetary policy to reduce inflation, severely hurting households and President Joe Biden’s approval ratings.

Earlier this month, the central bank increased interest rates by a whopping 75 basis points or three-quarters of a percentage point—the biggest increase in forty years. Fed Chairman Jerome Powell stated that while he believes the Fed will need to keep raising rates, it may decide to reduce the amount of the hikes as soon as next week. He explained, “The full effects of our rapid tightening so far are yet to be felt. Thus, it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down.” He added, “The time for moderating the pace of rate increases may come as soon as the December meeting,”

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