Very slight improvement is the message from October's consumer price report where all key readings, except for one, did no better than meet expectations. The CPI managed only a 0.1 percent rise in the month with the year-on-year rate sinking 2 tenths to 2.0 percent. The core rate, which excludes food and energy, managed only a 0.2 percent monthly rise though the yearly rate, and this is the good news, rose 1 tenth to a slightly better-than-expected 1.8 percent.
Deep contraction in wireless services prices has been holding down consumer prices most of the year but not the last two months as this closely watched sub-component has now put together back-to-back gains of 0.4 percent. Also improving in the month were housing costs, up 0.3 percent, and medical costs, also up 0.3 percent. But there are stubborn areas of weakness including new vehicles, down 0.2 percent, and prescription drugs, also down 0.2 percent.
But the annual core rate is moving, however slowly, in the right direction toward the Fed's 2 percent goal. Traction in wireless services is a help and perhaps also are wages which have been showing glimmers of isolated strength in recent months. Still, today's report won't settle the controversy between the doves, who haven't seen enough inflation to convince them that it's improving, and the hawks who keep expecting the low unemployment rate to give inflation a boost.
Consumer inflation has been soft and moderation in housing and medical costs held down the core CPI in September which rose only 0.1 percent. When including food and also energy which spiked on one-time hurricane effects, the overall CPI rose an outsized 0.5 percent. For October, forecasters see the overall CPI rising 0.1 percent with the less food & energy rate at 0.2 percent. Year-on-year, the CPI is seen at 2.0 percent with the core at 1.7 percent.