Inflation Measure Remains Flat in October, Boosting Hopes for a Soft Landing

According to Yahoo News, a key inflation indicator remained unchanged in October, as per recently released government data, fueling optimism that the economy can dodge a recession while inflationary pressure continues to wane. The personal consumption expenditures (PCE) price index saw no change on a monthly basis in October, as reported by the Commerce Department on Thursday. The same index had risen by 0.4% in both September and August. Over a 12-month period, the PCE price index increased by 3.0%, marking the lowest level since March 2021. In each of the three preceding months, the same index had risen by 3.4% on a 12-month basis. The core PCE price index, which excludes volatile food and fuel prices and is closely monitored by the Federal Reserve, increased by 0.2% on a monthly basis and 3.5% on a 12-month basis. Over the past six months, the core CPE has risen at a 2.5% annualized rate, which is not far from the Fed's 2% target. Economist Mike Konczal of the Roosevelt Institute, a left-leaning think tank, pointed out that core inflation is now lower on a six-month basis than when President Joe Biden took office. He wrote that this disinflation is unprecedented in the past 60 years, but so were the supply shock challenges from reopening. Former Obama administration economist Jason Furman believes that the much-discussed 'soft landing' scenario, where inflation drops without causing a severe recession or high unemployment, is becoming more probable. Treasury Secretary Janet Yellen also cited the same positive scenario, stating that signs are very good for achieving a soft landing. Yellen mentioned that in previous fights against inflation, the Fed had to tighten so much that it pushed the economy into a recession, but she hopes that won't be necessary this time. New York Fed President John Williams said on Thursday that the central bank will likely hold off on any further interest rate hikes, adding that Fed policy is the most restrictive it's been in 25 years and may need to remain so for 'quite some time' to ensure inflation is defeated. Williams expects the headline inflation rate to end the year at 3% before dropping to 2.25% in 2024.