The Consumer Price Index rose 3.2% year-over-year in October, below the 3.3% consensus estimate and marking a significant deceleration in inflation. Core CPI, which excludes food and energy, also cooled to 4.0% from 4.1%.
The report provides further evidence that the Fed's aggressive rate-hiking campaign is working to bring inflation under control. Shelter costs, which have been sticky, showed signs of moderating as the lagged effects of cooling rent prices begin to flow through.
Fed funds futures are now pricing in 75 basis points of rate cuts in 2024, up from 50 basis points before the report. The softer inflation print could accelerate the Fed's pivot timeline.