Consumer prices rose 0.4% in October, less than expected, as inflation eases

While inflation is still a threat to the U.S. economy, pressures could be starting to cool.

The Bureau of Labor Statistics said the consumer price index increased 0.4% for the month and 7.7% for the year. The estimates from the company were for increases.

Excluding volatile food and energy costs, so-called coreCPI increased 6.3% for the year, compared with estimates of 2.5% and 4.6%.

Inflation figures were brought down by a decline in used vehicle prices. Medical care services were lower.

Markets reacted to the report in a big way, with futures for the S&P 500 up more than 800 points. The 2-year note's yield fell by 0.22 percentage point.

Michael Arone, chief investment strategist at State Street Global Advisors, said that the trend in inflation is a good sign. Even though investors are gullible, they are still impatiently waiting for the Powell pivot, and I don't think it will happen soon. I think the enthusiasm this morning is overblown.

The Powell pivot comment refers to market expectations that the Federal Reserve Chairman will slow or stop the aggressive pace of interest rate increases they've been using to try to bring down inflation.

The cost of living is still high despite the fact that the inflation rate has slowed.

Workers took a pay cut because of inflation. Real average hourly earnings fell for the month and were down for the year.

Shelter costs, which make up about one-third of the CPI, rose 0.8% for the month, the largest monthly gain since 1990, and up 6.9% from a year ago. Fuel oil prices went up 19.8% for the month and are up 68.5% over the course of the year.

The food index increased 0.6% for the month and 10.9% for the year.

The Federal Reserve has been hiking interest rates in an effort to bring down inflation, which is at its highest level since the early 1980's.

The central bank approved its fourth consecutive 0.75 percentage point increase in November, taking its benchmark rate to a range of 3%- 4%, the highest level in 14 years. The fed funds rate is expected to top out at 5% early next year.

The Fed's next move was a topic of discussion among traders. The fed funds rate futures showed an increase in the likelihood of a move in December.

A single data point does not make a trend. Randy Frederick, managing director of trading and derivatives at Charles Schwab, said that he hopes for another downtick in the consumer price index with the next report. The markets are ready to respond to anything positive. It's like a coiled spring.

Heading into the holiday shopping season, getting inflation down is of paramount importance. According to a survey by Clever Real Estate, 1 in 3 Americans plan to cut back on spending this year because of higher prices.

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