US Inflation finally shows signs of cooling down

The North American stock markets soared this week on the news of the US inflation report for October reporting better than expected. The US S&P 500 rose more than 5% on Thursday alone, the biggest one-day gain since 2020. Nasdaq also recorded its best two-day gains since 2008. The tech-heavy Nasdaq added 8.1% and Canada’s S&P/TSX added 8.1% during the week.

 

The US consumer price index, a key inflation barometer for the US economy, increased 0.4% in October which records a 7.7%, vs. 7.9% expected, increase year over year. Both the annual and monthly figures were better than expected. The highest inflation rate for the US was recorded at 9.1% in June.

 

The numbers are still extremely high compared to their historical records. A basket of goods and services that cost 100 a year ago now takes 107.70 out of households" pockets. Shelter (rents and buying), food, and energy had the biggest impact on the hot inflation. Food rose 10.9 and Energy rose 17.6% year over year. All items less food and energy rose 6.3% with rents recording a 7% increase.

 

The cooler-than-expected inflation report may compel the hawkish US central bank to pivot from their interest rate increase sooner than what they have underlined before.