Households hoping inflation will continue to fall might be disappointed by the latest data.
Analysts expect to see that consumer prices rose 2.6% in October from the year before when the Bureau of Labor Statistics releases fresh figures Wednesday morning. That would be an uptick from the 2.4% rate in September — the slowest pace since President Joe Biden’s first full month in office. “Core” inflation, a measure that excludes volatile food and energy prices, is forecast to remain unchanged at 3.3%.
Voters vented their frustration with living costs last week in returning Republicans to power in the White House and the Senate after four years when prices have cumulatively increased about 20%, with the costs of many other goods and services rising even faster. While average wage gains continue to outstrip price hikes, leaving many households better off than before the pandemic, steeper expenses for child care to home insurance have left plenty of consumers fed up and looking for change.
Analysts were particularly focused on increases in used car prices based on recent auction prices, as well as in prices for travel and lodging, which may have been affected by the hurricanes that barreled through the Southeast this fall.
Broadly speaking, though, the economy remains strong as President-elect Donald Trump prepares to retake the Oval Office. Many employers continue to hire, and healthy retail sales and rising consumer confidence signal that households are willing to spend despite ongoing cost pressures.
October’s consumer price index provides a snapshot of the climate in which voters were casting their ballots. Many did so out of longing for the economy that prevailed during the first Trump administration, exit polls show. Yet it isn’t clear Trump will be able to replicate the steady growth and low inflation from the period before Covid hit, and many economists have warned that the platform he ran on this year would make inflation worse if it were implemented.
In the past week, investors have already begun selling off government bonds because they believe Trump’s proposals, like his plans for much higher tariffs and deeper tax cuts, could set off another round of price growth. When investors expect overall prices to increase, they sell bonds, because their fixed payments become less valuable over time.
That sell-off, in turn, has caused other borrowing costs, like mortgage rates, to turn back upward despite the Federal Reserve’s ongoing interest rate cuts.
At his news conference last week announcing a quarter-point rate cut, Fed Chair Jerome Powell warned of additional “bumps” in the path back toward the central bank’s 2% inflation target. He declined to address what impact Trump’s policies could have but indicated he wouldn’t be leaving his post. Trump has said he wants an unprecedented degree of input on Fed policy that many analysts say would risk undermining the central bank’s long-standing independence.
For now, inflation in other key consumer purchases remains subdued. Gas prices are about 30 cents lower than they were a year ago, while a report Tuesday from Adobe Insights showed an outright decline in online food prices over the past year, which hasn’t happened since January 2020.
Not all economists believe inflation is poised to reignite in the next administration, and some business owners don’t believe Trump would be able to implement them as promised. Others, however, are already taking precautions after having experienced his first round of economic policies.
Estimates of the potential costs to consumers from the tariffs proposal have varied, from as high as $7,600 per U.S. household, according to the National Retail Federation, to $1,700 for middle-income households, according to the pro-business Peterson Institute for International Economics.
Analysts with Citi financial group have said the cost increases from tariffs might end up representing only a one-time price rise of as much as 2% across the economy.
But they said such an outcome is far from guaranteed.
“While policies like tariffs would likely result in some months of stronger inflation, the overall magnitude and timing of the impact on inflation from various policies is still highly uncertain,” the analysts wrote in a note this week.
