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Inflation Surges To 31-Year High of 6.2% In October, Testing Fed Patience; Stocks Slide

U.S. consumer price inflation was tabbed at 6.2% last month, the BLS said Wednesday, marking the fastest pace of inflation since late 1990.

U.S. consumer price inflation accelerated to the fastest pace in three decades last month, data from the Bureau of Labor Statistics indicated Wednesday, as record-high energy prices and supply chain disruptions continue to test the Federal Reserve's 'transitory" narrative.

Headline CPI for the month of October was estimated to have risen 6.2% from last year, up from the 5.4% pace in September and the fastest rate since 1990. On a monthly basis, inflation was up 0.9%, the BLS said, with both tallies coming in well ahead of Wall Street forecasts.

So-called core inflation, which strips-out volatile components such as food and energy prices, rose 0.6% on the month, and 4.6% on the year, the report noted, with both readings topping the Street consensus forecast.

"While supply chain disruptions and labor shortages won't last forever, the bigger question is to what extent these factors affect wage inflation and housing inflation, which are stickier parts of the overall inflation picture and can be slower to reverse,": said Quadratic Capital Management founder Nancy Davis.

"The Fed is starting to taper its stimulus and might be forced to hike interest rates sooner due to rising inflation, but rate hikes might not be enough to reverse inflation because the sources of inflation involve supply chain bottlenecks and fiscal spending, which are two areas that the Fed doesn't control," she added.

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Overnight data from China showing factory gate inflation surging 13.5% from last year, to the fastest pace in nearly three decades, only added to concerns that supply chain disruptions, record high energy prices and loose central bank policies will stoke consumer price pressures well into next year.

Late last month, the Fed preferred measure of U.S. inflation showed few signs of easing in September, with core consumer prices remaining stubbornly close to their highest levels in three decades, putting a damper on overall spending. Last week's stronger-than-expected jobs report, too, showed average hourly earnings rising at an annual 4.9% clip.

U.S. equity futures traded modestly lower immediately following the data release, with futures contracts tied to the Dow Jones Industrial Average indicating a 95 point opening bell decline and those linked to the S&P 500 priced for an 18.75 point move to the downside.

Benchmark 10-year U.S. Treasury bond yields, meanwhile, edged higher, to 1.483%, while 30-year bonds were marked at 1.832% ahead of a new Treasury auction later in the session.