New reports indicate that inflation meaningfully declined last month, a development that investors are interpreting to mean that the Federal Reserve is likely done with raising interest rates and may start cutting them before long. The consumer price index, updated Tuesday, showed that inflation dropped half a percentage point to 3.2% for the year ending in October.
On a month-to-month basis, price growth was flat at 0%, better than expectations and a sign that the Fed’s at-times-aggressive rating-hiking cycle has been working. A separate report on Wednesday about the producer price index showed wholesale inflation inflation declining to just 1.3% for the year ending in October. Wholesale prices fell a half percentage point in just October alone, the biggest drop since April 2020, when the pandemic was throttling economywide demand. That two reports are buoying optimism that the Fed’s interest rate target of 5.25% to