In October, inflation continued its downward trend, as indicated by a decrease in the consumer price index (CPI) to 3.2% year-on-year, a drop from September’s 3.7%. This easing of inflation, primarily fueled by lower gasoline prices, marks a significant improvement from the pandemic-era peak of 9.1% in June 2022.

The 5% reduction in gasoline prices during October is a critical factor in the inflation slowdown. This decline, from $3.80 a gallon at the beginning of the month to $3.47 by the end, has continued into November, with average prices now at $3.37 a gallon. This contrasts sharply with the spikes observed in previous months, such as the 10.6% increase in August due to crude oil market dynamics.

Economists often focus on the “core” CPI, which excludes volatile energy and food prices, to gauge underlying inflation trends. In October, this measure dipped to 4% year-on-year, the lowest since September 2021. Housing inflation, which accounts for a significant portion of the core CPI, also decreased to 6.7%, signaling a potential slowdown in housing costs.

While food inflation saw a minor increase in October, the annual “food at home” inflation rate showed a notable decline to 2.1% from a pandemic-era peak of over 13%. Other categories, including motor vehicle insurance, recreation, personal care, and household furnishings, also increased over the past year

The global inflation surge has been attributed to a mix of supply and demand imbalances. Factors include the energy price spikes following Russia’s invasion of Ukraine, supply chain disruptions during the Covid-19 pandemic, and increased consumer spending. However, these pressures are gradually easing as supply chains normalize and the labor market cools.

The Federal Reserve has responded to inflationary pressures by raising interest rates to levels not seen since the early 2000s. This monetary policy is designed to slow down the economy by making borrowing more expensive, thereby helping to control inflation. Fed Chair Jerome Powell acknowledges that reaching the sustainable 2% inflation target remains a significant challenge, not expected to be achieved until 2026.