US Inflation Finally Offers Relief, But There’s Still a Long Way to Go

A cooling in US consumer prices offered cheer to households, investors and Federal Reserve officials, but there’s still a long way before high inflation becomes history.

At 7.7%, annual inflation in October was the slowest since January -- before the start of Russia’s war in Ukraine that triggered a worldwide surge in commodities and pump prices. Even more importantly for the Fed, a closely watched measure that excludes food and energy decelerated by more than economists anticipated.

With slowdowns across categories including food, apparel and used cars, the report suggests that the fastest price increases in decades may finally be starting to ebb in the world’s largest economy. And it probably gives the US central bank enough assurance to moderate its aggressive interest-rate hikes if the trend is sustained.

US stocks, battered this week by a massive rout in crypto-related shares, surged after the report. Treasury yields plummeted and the Bloomberg dollar index tumbled. Traders moved to price a half-point Fed hike in December as a near certainty, and cut to below 5% where they see borrowing costs peaking next year.

Still, the figures are only an early step on a long path to tame inflation that’s been entrenched for months and remains well above pre-pandemic levels.