Inflation Stays Low. What Will the Fed Do?

Inflation – more precisely The Consumer Price Index for All Urban Consumers (CPI-U) — rose 0.4 percent in October on a seasonally adjusted basis after being unchanged in September, the U.S. Bureau of Labor Statistics reports.

Over the last 12 months, the all items index increased 1.8 percent before seasonal adjustment. This is lower than the 2% rate the Federal Reserve likes to see. Such low inflation gives the Fed running room to keep interest rates low going into 2020.

BLS said the energy index increased 2.7 percent in October after recent monthly declines and accounted for more than half of the increase in the seasonally adjusted all items index; increases in the indexes for medical care, for recreation, and for food also contributed.

The gasoline index rose 3.7 percent in October and the other major energy component indexes also increased. The food index rose 0.2 percent, with the indexes for both food at home and food away from home increasing over the month.

The index for all items less food and energy rose 0.2 percent in October after increasing 0.1 percent in September.

Along with the indexes for medical care and for recreation, the indexes for used cars and trucks, for shelter, and for personal care all rose in October, though the increase in the shelter index was the smallest since October 2013.

The apparel index fell in October, as did the indexes for household furnishings and operations, for new vehicles, and for airline fares.