In October, prices held steady as inflation slowed further, according to figures released by the US government. The latest data from the Labor Department showed that the Consumer Price Index (CPI) – the main gauge of inflation – decreased by 0.1 percent in October, following a 0.3 percent decrease in September.
This comes as the US economy continues to grapple with the effects of the coronavirus pandemic. The service sector, which was particularly hard hit by the crisis, showed signs of improvement with the CPI for services rising 0.2 percent in October, in contrast to the 0.2 percent decline in September. The CPI for goods, however, decreased 0.4 percent in October, down from a 0.2 percent increase in the previous month.
Analysts suggest that the slowdown in inflation is the result of lower energy prices, weakened consumer demand, and declining expectations of future price increases. The Department of Labor’s measure of core inflation excluding food and energy – which is considered to be a better gauge of underlying price pressures – remained unchanged at 1.6 percent in October.
The slower pace of inflation, combined with near-zero interest rates, implies that a strong economic recovery may take some time to materialize. Nevertheless, it provides a welcome respite from potential price rises as businesses seek to pass on the cost of COVID-19 restrictions to consumers.
The Fed has already said it will keep rates near zero until inflation rises to its target level of 2 percent. As the world economy continues to be hit by the pandemic, the impact on prices will remain uncertain, making it difficult to predict what impact further stimulus packages may have on inflation in the coming months.
“October Sees Prices Stable Despite Further Slowing of Inflation
