According to the Labor Department, inflation across a wide range of products consumers purchase every day was worse than expected in October. It reached its highest level in over 30 years.
The consumer price index is a collection of products that includes gasoline, health care, groceries, and rents. It rose 6.2% from one year ago, which was the highest increase since December 1990. This is compared to the Dow Jones estimate of 5.9%.
The CPI rose 0.9% monthly against the 0.6% forecast.
The core CPI, which excludes volatile food and energy prices was 0.6% higher than the 0.4% estimate. Core inflation in the year was 4.6%, which is higher than the 4% expected and is the highest rate since August 1991.
Prices for fuel oil rose 12.3% in October, which is part of a 59.1% rise over the previous year. The 12-month-to-date increase in energy prices was 4.8%, and 30% overall.
The rise in used vehicle prices was a major contributor to the increase of 2.5% for the month and 26.4% over the year. Prices for new vehicles rose by 1.4% and 9.8%, respectively.
The prices of food also saw a significant rise, with prices rising by 0.9% and 5.3%, respectively. Meat, poultry, fish, and eggs all saw a 1.7% increase in month-over-year sales, and 11.9% for year.
Workers fell behind due to the price rises.
The Labor Department released a separate report stating that real wages after inflation decreased 0.5% between September and October. This was due to a 0.4% increase of average hourly earnings, which was more than offset in part by the CPI rise.
Shelter costs, which account for one-third of CPI calculation, rose 0.5% in the month. They are now up 3.5% year-over-year, raising concerns that inflation might be more persistent than policymakers expect. This is the fastest annual rate since September 2019.
Principal Global Investors' chief strategist Seema Shah stated that inflation is getting worse before it gets better. The significant rise in shelter prices is further evidence of an increase in inflation pressures.
These data are coming as Fed Chairman Jerome Powell, Treasury Secretary Janet Yellen and other policymakers believe that current price pressures will subside over time and are related to Covid-specific issues. They expect conditions to return to normal in the next year, despite admitting that inflation has been more persistently than they anticipated.
The report led to a fall in stock market futures and an increase in bond yields.
The Fed could tighten its policy faster than previously indicated due to rising inflation. Although the central bank indicated it would reduce the number of bonds it purchases each month within the next few days, officials indicated that future interest rate increases are possible.
According to CME's FedWatch tool, traders priced in two rate hikes in 2022. There was a 44% chance of a third increase. Although the Fed indicated that there is a small chance of only one rate increase, James Bullard, President of St. Louis Fed, told CNBC overnight that he sees at least two.
Other market-based measures have also become more hawkish. The 5-year breakeven rate which compares Treasury yields with inflation-indexed bonds, reached a record high of 3%.
A separate report Wednesday revealed that initial claims for unemployment benefits fell to 267,000. This is a new low in the pandemic era after a decline of 4,000 over the week before. This was lower than the Dow Jones estimate of 269,000.
Continuing claims, which are a week late, rose by 59,000 to 21.6 million. However, the total number of people receiving benefits from all programs dropped by 107.095 to 2.56 millions. This number was 21.7 million last year.
Correction: The annual core inflation rate was 4.6%, which is higher than the 4% expected and the highest level since August 1991. An earlier version of this article misrepresented the year and month.