Good news at last? Inflation cools to 3.2% - down from 3.7% in September - as airline fares, smartphones and eggs tumble in price

The annual rate of inflation fell in October to 3.2 percent - a positive sign that inflation is on its way down and an era of relentless interest rate hikes may be over.

In both August and September, annual inflation was up at 3.7 percent after dropping momentarily to 3.0 percent in June, but price increases now appear to be cooling down again.

In June 2022, in the wake of the pandemic, inflation reached a 40 year-high of 9.1 percent. 

Consumer price index figures released Tuesday by the US Bureau of Labor Statistics revealed that on a monthly basis, between September and October, prices held approximately steady.

That monthly change is a drop from the increase of 0.4 percent in September, and a promising sign for the Federal Reserve, which has been trying to control inflation with historic interest rate hikes.

The cost of food at home rose 2.1 percent over the last 12 months. Cereals and bakery goods were up 4.2 percent while dairy products decreased 0.4 percent over the year.

Between October 2022 and October 2023, car insurance, white bread and shelter were up 19.2, 7.1 and 6.7 percent respectively. Over that same period, airline fares, smartphones and used cars were down 13.2, 12.0 and 7.1 percent. 

The cost of shelter continued to rise in October, offsetting a decline in the price of gasoline, which was down 5.0 percent on the previous month. The reduction in gas prices helped to bring the overall month on month cost of energy down 2.5 percent.

The core rate, which excludes volatile food and energy, was up slightly by 0.2 percent from September, but decreased on an annualized basis from 4.1 to 4 percent - its smallest 12-month change since September 2021.

Julia Pollak, ZipRecruiter chief economist, said in a note on Wednesday morning that annual inflation may finally dip below 3 percent next month but that consumer spending will still remain fairly strong thanks to wage growth.

'The consumer price index came in better than expected this morning, showing continued progress in the fight against inflation,' said Pollak.

'With 3.2 percent inflation over the year and 4.1 percent wage growth, American workers continue to experience positive real wage growth,' she added.

'Expect consumer spending to remain resilient as the purchasing power of American wage and salary workers gradually recovers.'

The reported decline in inflation prompted Treasury yields to fall sharply and the price of US stocks to rise, as investors became increasingly confident that the Federal Reserve would not increase its benchmark interest rate again.

It held its benchmark Fed Funds Rate rate steady at a 22-year high earlier this month, at around 5.25-5.50 percent.