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Key takeaways

  • The October 2024 Consumer Price Index (CPI) report met economists' expectations, supporting the Federal Reserve's (Fed) easing path despite a slight year-over-year increase from 2.4% to 2.6%.
  • Headline CPI rose by 0.2% month-over-month for the fourth consecutive month, while Core CPI (excluding food and energy) increased by 0.3% MoM and 3.3% year-over-year.
  • Shelter and used cars contributed more to the monthly price increase than expected; however, other core indices suggested broad-based easing in price pressures, indicating that inflation pressures were slightly mild.
  • Our strategists expect the October CPI report will keep the Fed on its path of slowly normalizing interest rates, with the labor market – rather than inflation – determining whether the pace of rate adjustments needs to accelerate.

Contributors

Cristina Dwyer

Analyst, J.P. Morgan Wealth Management

 

The October 2024 Consumer Price Index (CPI) report met economists' expectations, supporting the Federal Reserve’s (Fed) easing path despite a slight year-over-year (YoY) increase from 2.4% in September to 2.6%. This marks the first annual rise since March.1

Headline CPI rose by 0.2% month-over-month for the fourth consecutive month, while core CPI (excluding food and energy) increased by 0.3% month-over-month (MoM) and 3.3% YoY. This brings the three-month annualized rate to 3.6%,2 the highest pace since April.

This line graph shows the year-over-year percentage change in the Consumer Price Index (CPI) from 2020 to 2024.

U.S. headline and core CPI

 

YEAR OVER YEAR PERCENT CHANGE

 

This chart shows the year-over-year percentage change in the Consumer Price Index (CPI) for both headline and core inflation from 2020 to 2024.

  • In 2020, headline CPI peaked at 1.5% and core CPI was at 2.4%.
  • In 2021, headline CPI peaked at 6.8%, while core CPI was at 4.9%.
  • In 2022, headline CPI peaked at 9.1%, with core CPI at 5.9%.
  • In 2023, headline CPI averaged approximately 4.3% and core CPI averaged around 4.7%.
  • In 2024, headline CPI increased to 2.6%, while core CPI increased to 3.3%.

 

Source: Bureau of Labor Statistics, data as of November 13, 2024

This line graph shows the year-over-year percentage change in the Consumer Price Index (CPI) from 2020 to 2024.

 

Breaking down the headline CPI

Shelter inflation, which accounts for a third of the total inflation basket, remained sticky, contributing to increases in both headline and core prices. The shelter component increased by 0.4% MoM and 4.9% YoY in October.3

The energy index remained unchanged MoM, following a 1.9% decline in September, and declined by 4.9% YoY. Gasoline prices declined by 0.9% MoM and 12.2% YoY. In contrast, electricity prices increased by 1.2% MoM and 4.5% YoY, while natural gas prices rose by 0.3% MoM and 2% YoY.4

The food index increased by 0.2% MoM and 2.1% YoY, representing moderation from its 0.4% MoM increase in September. Food at home prices rose by 0.1% MoM and 1.1% YoY. Meanwhile, food away from home prices rose a softer 0.2% MoM, compared to a 0.3% MoM rise in the previous two months, and rose by 3.8% YoY.5

Core CPI findings

Shelter and used cars contributed more to the monthly price increase than expected. However, other core indices suggested broad-based easing in price pressures, indicating that inflation pressures were slightly mild.

Core goods were broadly unchanged in October. Used vehicle prices rose by a sharper 2.7%, following a 0.3% rise the month prior. The rise in used vehicle prices, along with the 0.4% MoM rise in hotel rates,6 partly reflect the impacts of Hurricanes Helene and Milton, which caused heartache and destruction and led to evacuation orders. Our condolences are with all those affected by these events.

Excluding used car prices, core goods prices fell 0.2% MoM, marking the largest drop this year and indicating broad-based deflation in goods. Apparel prices fell by 1.5% following a 1.1% rise in September,7 marking the biggest monthly decline since the beginning of the COVID-19 pandemic.

Core services increased by 0.3% MoM, slowing from a 0.4% increase in September. Airfares surged by 3.2% MoM for the second straight month. Motor insurance edged up by 0.1%, softer than the 1.2% increase the previous month and the second monthly decline since the beginning of 2022,8 offering consumers some relief.

Shelter contributed to over 65% of the total YoY increase in core prices. Within the shelter component, the owners’ equivalent rent index rose 0.4% MoM and the rent index rose 0.3% MoM.9

Looking ahead, our strategists expect that core inflation will gradually ease closer to 2% as economic growth decelerates and the labor market achieves greater balance.

Possible implications for the Fed

Our strategists expect the October CPI report will keep the Fed on its path of slowly normalizing interest rates, with the labor market – rather than inflation – determining the pace of Fed policy.

This report follows recent weaker labor market data and robust economic growth in the third quarter, showing the consumer and economy remains resilient despite some softening in the labor market.10

Last week, at the November Federal Open Market Committee (FOMC) meeting, the Fed lowered interest rates by 25 basis points, after cutting rates by 50 basis points in September. Fed Chairman Jerome Powell reiterated that the U.S. economy has made significant progress towards the Fed’s dual mandate of maximum employment and stable prices. Going forward, he expressed that the path of policy will likely be moving lower towards “neutral,” with a data-dependent speed and level.

The market is pricing an 80% chance of a 25 basis point cut at the Fed's next FOMC meeting on December 14-15 and a total of 80 basis points of cuts by the end of next year – about one cut less than our strategists expect.

For more information on how this economic data may impact your investment strategy, consult a J.P. Morgan advisor.

References

1.

U.S. Bureau of Labor Statistics (BLS), “Consumer Price Index Summary.” (November 13, 2024)

2.

Ibid.

3.

Ibid.

4.

Ibid.

5.

Ibid.

6.

Ibid.

7.

Ibid.

8.

Ibid.

9.

Ibid.

10.

Bureau of Labor Statistics (BLS), “The Employment Situation – October 2024.”


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