A measure of inflation closely monitored by the Federal Reserve eased but remained elevated in October, likely reinforcing the Fed’s intent to keep raising interest rates. A Commerce Department report showed prices rose 6% in October from a year earlier.
. Yet at the same time, Powell made clear that the policymakers intend to keep their key rate, which affects many consumer and business loans, at a high level for a prolonged period.
The Fed’s series of aggressive rate increases have made borrowing costs sharply more expensive across the economy. The housing market, in particular, has been hammered by a doubling of mortgage rates from a year ago: Sales of previously occupied homes have dropped for nine straight months. Many economists expect the United States to fall into a recession next year as the effects of those costlier loan rates take root.
The Fed is believed to monitor the inflation gauge that was issued Thursday, called the personal consumption expenditures price index, even more closely than it does the government’s better-known consumer price index. The government has reported that the CPI rose 7.7% October from 12 months earlier, down from June’s 9.1% year-over-year increase, which had been the biggest such jump in four decades.The PCE index tends to show a lower inflation level than CPI.
The PCE price index also seeks to account for changes in how people shop when inflation jumps. As a result, it can capture, for example, when consumers switch from pricey national brands to cheaper store brands.
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