- Inflation, as measured by the consumer price index (CPI), appears subdued in the October reading. While headline CPI inched up 0.4 percent in October from September, it has risen 1.8 percent over the last 12 months. The largest contributor to the increase in October was an increase in energy prices.
CPI for all items less food and energy, a less volatile measure, rose 0.2 percent in October from September and has risen 2.3 percent over the last 12 months.
Prices have been stable over the past two months and there has been little evidence of accelerating inflation. The relative stability of prices suggests that in the presence of supply shocks there is not necessarily a trade-off between unemployment and inflation. The negative relationship between unemployment and inflation, typically captured by what economists call the “Phillips Curve,” does not appear to bind in the presence of a supply shock. These dynamics suggest continued unemployment and price stability.