Underlying US inflation pressures eased in October, NY Fed says

NEW YORK  –Underlying inflation pressures eased in October compared to the prior month, according to a report released on Monday by the Federal Reserve Bank of New York.

The bank said that its Multivariate Core Trend (MCT) inflation reading for October stood at 2.6 percent, from September’s 2.88 percent. The higher level of the MCT relative to its pre-pandemic average “is in large part due to the sector-specific trends in housing and services ex-housing,” the bank said.

The NY Fed MCT index is designed to measure inflation persistence and how broadly price pressures are changing. The report arrives as Fed officials are approaching their final policy meeting of the year, one in which they are broadly expected to keep their overnight interest rate target steady at between 5.25 percent and 5.5 percent.

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The current level of the central bank’s rate target appears to be its peak. Over recent weeks, a wide range of Fed officials have signaled that with inflation pressures well off their pandemic peak, they have the space to take in new data to see whether they need to increase rates again, or keep them steady.

On Friday, Fed Chairman Jerome Powell said the economy is “better balanced,” and when it comes to the trajectory of the economy, “we are getting what we want.”

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On Thursday, New York Fed leader John Williams said “based on what I know now, my assessment is that we are at, or near, the peak level of the target range of the federal funds rate.”

The NY Fed MCT reading has tracked a broader retreat in price pressures. The index peaked in June 2022, when it stood at 5.44 percent. October’s reading also closely matched the six-month trend of the personal consumption expenditures price index, which stood at a 2.5-percent rise in October.

“While the lower inflation readings of the past few months are welcome, that progress must continue if we are to reach our 2 percent objective,” Powell said on Friday.

Williams in his Thursday appearance said he expects the Fed to be closing in on its target in 2025. Officials will update their outlook on inflation at the FOMC meeting scheduled for Dec. 12-13.