Progress Continues on Bringing Inflation Down

The October consumer inflation data indicate that progress is being made in reducing inflation, although price pressures still remain significantly above the Federal Reserve’s preferred level, according to Chicago Fed President Austan Goolsbee. Speaking at the Detroit Economic Club, Goolsbee emphasized that there is still a long way to go before reaching the 2% PCE inflation target, which is the Fed’s preferred measure of inflation.

Challenges on the Path to Deflating Inflation

Goolsbee acknowledged that there will always be some obstacles to overcome as inflation declines. However, he expressed optimism about the Fed’s achievements in 2023 and hoped for continued success in deflating inflation. He further highlighted that this year could witness the largest drop in inflation in a peacetime economy in a century, underscoring the role of housing inflation as a determining factor in the upcoming months.

A Potential “Softest of All Soft Landings”

Referring to the state of the U.S. economy, Goolsbee pointed out the possibility of a remarkably smooth transition. He named it “the softest of all soft landings.” Such a scenario has been facilitated by robust supply-side developments and notable productivity growth.

Read: U.S. Prices Not Rising as Fast

These developments had an immediate impact, leading to a flat headline inflation in October, primarily attributed to the decline in gasoline prices. Notably, this was the smallest increase observed in 15 months. Consequently, stock prices surged, with DJIA SPX witnessing significant gains, while bond yields BX:TMUBMUSD10Y dropped upon the release of this data.

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