WASHINGTON, D.C. – The US inflation rate fell to 3.2% in October, marking a decline for the first time in four months. This rate was lower than what economists had predicted, with consumer prices rising 3.2% year on year, down from the previous 3.7% in September. In addition, the annual rise was slightly less than expected, and prices remained flat on a month-on-month basis.

The central bank had kept its benchmark interest rate steady at a 22-year high earlier in the month, leading investors to become increasingly confident that the rates had peaked. However, futures markets were still pricing in a 13% chance of a further rate rise at the upcoming Fed’s rate-setting meeting in mid-December.

In terms of core inflation, which excludes volatile food and energy prices, the numbers were also slightly weaker than what economists had predicted. This figure dropped from 4.1% to 4.0% on a year-on-year basis, with a 0.2% rise on a month-on-month basis.

Despite the stronger-than-expected gross domestic product growth, fears of a stall in inflation due to the slowdown in economic expansion have emerged. Fed Chair Jay Powell has emphasized that policymakers would not be “misled by a few good months of data,” signaling a potential tightening of monetary policy if necessary.

Given these circumstances, the Fed is increasingly expected to delay the timing of rate cuts deeper into 2024 if consumer prices remain stubbornly high. One potential concern is that increased confidence in the economy could push down Treasury bond yields, leading to another rise in inflation.

To prevent this scenario, Fed officials are closely monitoring financial conditions in equity and bond markets, aiming to bring inflation down to 2% in a timely and sustainable way.

In summary, the US inflation rate dropped to 3.2% in October, lower than expected and marking the first decline in four months. Despite concerns of a stall in inflation due to economic expansion, the Fed remains vigilant and prepared to take necessary actions to ensure a sustainable economic environment.