Inflation slightly higher in October, credibility remains a stubborn obstacle: CEI analysis

The latest Consumer Price Index report shows inflation increased from 2.4 percent in September to 2.6 percent in October. While economic growth and the job market are both in good shape, CEI senior economist Ryan Young says the biggest obstacle to conquering inflation remains government credibility.

“Inflation ticked up a little bit in October, from 2.4 percent to 2.6 percent. While a return to 9 percent inflation is not in the cards without another major stimulus campaign, October’s uptick is a reminder of how difficult it is to stop inflation once it starts.

“Economic growth and unemployment are both in good shape right now. But if either of them slow down, markets expect another stimulus surge from Washington, regardless of which party is in power. Companies factor this expected inflation into their contracts, investments, salaries, and other decisions, and the result is a self-fulfilling prophecy of above-average inflation.

“The biggest obstacle to getting inflation back to its 2 percent target is credibility, and neither party has it. This should give the Federal Reserve some pause as it considers another interest rate cut at its next meeting, which happens December 17-18.”