The consumer price index rose 0.1 percent in October, according to the Bureau of Labor Statistics. This is a slower pace than what was observed in August and September (with 0.6 percent higher inflation in both months) when energy prices were up sharply. In October, energy prices were down 0.2 percent, with gasoline prices off 0.6 percent. Food prices increased 0.2 percent, with higher dairy, meat, and fruits and vegetables pushing costs up.

Core inflation – which excludes food and energy costs – were up 0.2 percent. This was largely due to higher costs for services (up 0.3 percent). The average price of core goods has fallen for three consecutive months and was down 0.1 percent in October. Year-to-date core inflation is currently 2.0 percent, which is in-line with the goal set by the Federal Reserve Board and suggests modest price increases overall. Indeed, the minutes from the October Federal Open Market Committee meeting, which were released yesterday, read:

Participants saw recent price developments as consistent with inflation remaining at or below the Committee’s 2 percent objective over the medium run. Although energy prices had risen sharply in recent months, reflecting earlier increases in crude oil costs and supply disruptions, gasoline prices were anticipated to move back down in coming months as those pressures eased. Similarly, effects of the drought were expected to show through to retail food prices over the next few quarters but then subside. By various estimates, underlying inflation trends remained subdued, and indicators of longer-term inflation expectations were generally viewed as stable.

With inflation in-check (at least for now), the FOMC has been free to pursue more accommodative actions, helping to push interest rates to historic lows and attempting to stimulate economic growth. These policies are expected to continue moving into 2013.

Chad Moutray is chief economist, National Association of Manufacturers.

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