US inflation up but Fed likely to continue cutting interest rates

American inflation has risen for the first time since March but ratesetters at the Federal Reserve insisted that interest rates are still on a downward path.
Figures published by the US Bureau of Labor Statistics showed that the rate of annual inflation was up 2.6 per cent in October from 2.4 per cent in the previous month, in line with analysts’ expectations.
On a monthly basis, prices rose by 0.2 per cent, also in line with forecasts and unchanged compared with September.
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Measurements of inflation that remove volatile items like food and energy indicated that price pressures are at risk of embedding in the US economy. Core monthly and annual inflation were unchanged at 0.3 per cent and 3.3 per cent respectively. So-called supercore inflation edged up to 4.4 per cent annually from 4.3 per cent.
The data suggests that inflation remains suspended above the Federal Reserve’s 2 per cent target after falling sharply from a high of 9.1 per cent two years ago. Rapid tightening of monetary policy by the Fed helped to bring down inflation.
However, Neel Kashkari, president of the Federal Reserve Bank of Minneapolis who will next be entitled to vote on US interest rates in 2026, said he has confidence that inflation is headed in the “right direction”.
Speaking to Bloomberg TV as the latest US consumer price index inflation figures were released, Kashkari said that he does not think there are “upside” inflation risks, adding that the larger threat is if the rate gets “stuck” above the Fed’s target.
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He added that inflation risks existed before Donald Trump won the US presidential election earlier this month. Economists have raised the alarm over a potential inflationary fallout if the incoming president cuts personal and corporate taxes and imposes blanket tariffs of up to 20 per cent on goods imports.
Analysts still think that the Fed will deliver a 25 basis point cut to the federal funds rate range from 4.5 per cent to 4.755 per cent at its next meeting in December, following a reduction of the same size in November. The central bank started lowering interest rates in September with a larger-than-usual 50 basis-point reduction.