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The Consumer Price Index released on Tuesday showed inflation rose 3.2% for the 12-month period ending in October, a significantly slower pace than the 3.7% annual rate for September. 

Viewed on a monthly basis, the CPI was unchanged during October, following September’s 0.4% rise. A sharp decline in the gasoline prices during the month of October was essentially offset by a rise in shelter costs that kept the monthly inflation rate flat, the U.S. Bureau of Labor Statistics said. 

The overall energy index fell 2.5% over the month as the 5.0% decline in the gasoline index more than offset increases in other energy component indexes. The food index increased 0.3% in October, after rising 0.2%
percent in September. 

The core index for all items less food and energy rose 0.2% in October, after rising 0.3% in both September and August. The indexes which include rent, owners’ equivalent rent, motor vehicle insurance, medical care, recreation, and personal care increased. The indexes for lodging away from home, new and used vehicles, communication, and airline fares were among those that decreased over the month. 

The all items index, which includes the more volatile food and energy indexes, rose 3.2% percent for the 12 months ending October, a smaller increase than the 3.7% increase for the 12 months ending September. The all items less food and energy index rose 4.0% over the last 12 months, its smallest 12-month change since the period ending in September 2021. The energy index decreased 4.5% for the 12 months ending October, and the food index increased 3.3% over the last year. 

The Federal Reserve will review the October CPI report and other economic indicators before its next meeting, Dec. 12-13, when it will decide on short-term interest rates. The Fed’s goal has been to reduce inflation to 2% and it has undertaken a series of interest rate increases to cool the economy.  

The Fed last raised the federal funds benchmark interest rate in July to a 22-year high of 5.25% to 5.50%.  The Fed opted to forgo any further increases at its meetings in September and November amid signs inflation was cooling but signaled the possibility of one more increase before the end of the year.  

The stock market rallied in early trading on Tuesday after the CPI report was released as investors reacted positively to the news of slowing inflation and the possibility that it would prompt the Fed to forego an interest rate hike in December that would raise borrowing costs for businesses.