October Inflation Cools To 7.7%, Stocks Sprint Higher: What You Need To Know

Zinger Key Points
  • According to data from the U.S. Bureau of Labor Statistics, the headline CPI rose 7.7% in October, down from 8.2% in September
  • The October CPI reading came in below average economist estimates of 8%.

The SPDR S&P 500 SPY is moving higher Thursday morning after the Labor Department reported a 7.7% year-over-year increase in the consumer price index for October.

What Happened: The headline CPI rose 7.7% in October, down from 8.2% in September, according to data from the U.S. Bureau of Labor Statistics.

The October CPI reading came in below average economist estimates of 8%.

On a month-over-month basis, CPI was up 0.4% versus average economist estimates for a 0.5% jump.

Core inflation, which excludes volatile food and energy prices, was up 6.3% in October, below average economist estimates for a 6.5% gain.

The Labor Department said energy prices were up 1.8% in October, while food prices climbed 0.6%.

Why It Matters: Thursday's highly anticipated CPI inflation reading comes a week after the Federal Reserve raised its benchmark rate by 0.75% for the fourth straight time in a continued fight against historically high inflation. The Fed's rate increases are expected to eventually slow the economy and spur layoffs. Thursday's data appears to be a step in the right direction.

Check This Out: Why Jim Cramer Says Inflation Is Throwing A No-Hitter Against Fed Chair Jerome Powell: 'He's Not On Base Yet'

Last week's Fed statement included language surrounding the cumulative tightening of monetary policy and the lag with which it affects inflation, which sent stocks higher on the release.

In a press conference following the statement, Fed Chair Jerome Powell highlighted new data since the last meeting and the market turned sharply lower.

"At some point, as I've said in the last two press conferences, it will become appropriate to slow the pace of increases as we approach the level of interest rates that will be sufficiently restrictive to bring inflation down to our 2% goal. There is significant uncertainty around that level of interest rates, even so, we still have some ways to go and incoming data since our last meeting suggests that the ultimate level of interest rates will be higher than previously expected," Powell said. 

The Fed chair was likely referring to last week's strong jobs number. Friday's Labor Department data showed that the U.S. added 261,000 jobs in October, well above average economist estimates of 205,000. 

"The historical record cautions strongly against prematurely loosening policy. We will stay the course until the job is done," Powell added.

The Fed's final meeting of the year is slated for Dec. 14. Thursday's cooler-than-expected CPI print suggests the Fed could opt for a less aggressive 0.5% rate hike next month.

SPY Price Action: The SPY was up 3.02% at $385.41 Thursday morning, according to Benzinga Pro.

Photo: John Loo from Flickr.

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Posted In: NewsEcon #sTop StoriesFederal ReserveCPIInflationInterest RatesJerome Powell
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