Intelligent Investment
Economic Watch: Headline Inflation Ticks Up in October as Expected
November 13, 2024 3 Minute Read
Executive Summary
- As expected, the Consumer Price Index (CPI) rose by 2.6% year-over-year in October, up from 2.4% in September.
- Core inflation, which excludes food and energy prices, remained at 3.3% year-over-year, also meeting expectations.
- There were notable year-over-year increases in housing (4.9%) and transportation costs (8.2%), while energy prices fell by 4.9%.
- Despite the October uptick, inflation’s downward move over 2024 will justify another 25-basis-point Fed rate cut in December. In 2025, we expect the Fed will slow its rate-cutting cycle.
The Bottom Line
Core CPI remained at 3.3% year-over-year in October, largely reflecting a 4.9% increase in housing prices. Higher motor vehicle insurance (14.0%), transportation (8.2%) and medical care (3.8%) costs also contributed to the October inflation reading.
We expect overall inflation to resume its downward trend in 2025 but persistent service-sector inflation and above-average GDP growth make it likely that the Fed will slow its rate-cutting cycle following a 25-basis-point cut in December. We expect the Fed will reduce the frequency of rate cuts to every other FOMC meeting in 2025, with the federal funds rate ending the year a full percentage point lower.
President-elect Trump’s policy proposals pose both positives and negatives for the economy. We expect that short-term interest rates will fall in 2025 but long-term rates will remain above 4%, higher than our previous expectation.
We expect economic conditions that support commercial real estate leasing activity will continue next year. Improving real estate fundamentals will partially offset the headwind to capital markets activity from the relatively high 10-year Treasury yield. Overall, we expect modest investment volume growth next year.
