US inflation loses traction in October – UOB

Alvin Liew, Senior Economist at UOB Group, assesses the latest release of US inflation figures.

Key Takeaway

“US headline consumer price index (CPI) inflation rose by 0.4% m/m, same pace as Sep but slower against Bloomberg’s estimate of an increase by 0.6% m/m. As a result, headline inflation continued to come off from recent highs (9.1% y/y in Jun 2022) but was still elevated at 7.7% y/y in Oct (from 8.2% y/y in Sep), below Bloomberg’s estimate of 7.9% and the first time the y/y inflation was below 8% since Feb 2022.”

“The core CPI inflation (which excludes food and energy) continued to increase sequentially, but at a pace below expectations which sparked hopes of abating underlying momentum for price pressures. On a m/m basis, core inflation rose by 0.3% in Oct, down from 0.6% in Sep, and below Bloomberg estimate of 0.5%. Compared to a year ago, it rose by 6.3% y/y in Oct, down from 6.6% y/y in Sep, below Bloomberg estimate for 6.5%.”

“US Inflation Outlook – With the latest US headline inflation printing further below the 9.1% recorded in Jun, while core inflation also eased from its recent high of 6.6% y/y (in Sep), we will adjust our forecasts for 2022 accordingly. We revise our headline CPI inflation forecast to average 8.2% (from 8.5% previously) and our core CPI inflation forecast at average 6.3% for 2022 (from 6.5% previously). FOMC Outlook – While we still see the balance of inflation risks to the upside, the latest inflation outcome does give us confidence for our current call for a smaller 50-bps Fed rate hike in Dec FOMC (after four consecutive 75-bps hikes).”