Inflation Retreats as Virus Threat Rises

Both the headline and core consumer price indexes were unchanged in October after rising by +0.2% the previous month. The unchanged readings pulled year-over-year CPI down from +1.4% to +1.2% and core CPI from +1.7% to +1.6%, well below the Fed‘s +2.0%+ target. The decline was mostly attributed to a drop in used car prices after months of surprising increases, as well as a dip in apparel prices. The producer price index (PPI) told a similar story. Headline PPI climbed +0.3% in October, while core PPI rose by just +0.1%. On a year-over-year basis, headline PPI was up +1.1%, while core PPI was up +0.8%. All else being equal, retreating prices support the Fed’s “lower-for-longer” zero rate policy.

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