Jerome Powell, chairman of the U.S. Federal Reserve, speaks during a Senate Banking, Housing and Urban Affairs Committee hearing in Washington, D.C., on Nov. 30, 2021.

Jerome Powell, chairman of the U.S. Federal Reserve, speaks during a Senate Banking, Housing and Urban Affairs Committee hearing in Washington, D.C., on Nov. 30, 2021. (Al Drago/Bloomberg)

Inflation stayed high but showed signs of slowing in October, as families and businesses continued to face rising costs for basics like food and rent — and as the Federal Reserve ramped up its efforts to lower consumer prices, even at the risk of forcing a recession.

Prices rose 7.7 percent in October compared with the year before, and 0.4 percent over September, the same rate as the previous month, according to data released Thursday morning by the Bureau of Labor Statistics. As analysts had expected, the latest report told an all-too-familiar story for Americans nationwide: Inflation is the biggest threat to the economy and continues to burrow into nearly every part of life.

Inflation continues to hammer basic necessities like housing, food and gas. The shelter index made up more than half of the monthly increase, showing how high rental costs remain despite a recent slowdown in the housing market. Rent was up 0.7 percent compared to the month before, and it's up 7.5 percent over the year.

Gasoline prices rose 4 percent over September, after three months of consecutive declines. Gas is also up 17.5 percent over the past year, largely because of Russia's invasion of Ukraine and the sanctions the West has imposed on a major oil producer. Other oil-exporting nations are also cutting back production.

Food rose 0.6 percent over September, easing slightly from the month before. Costs for meats, poultry, fish and eggs rose, as did the cost of cereals and bakery products.

Still, there were some month-to-month declines, including drops in prices for used cars and trucks (2.4 percent), medical care (0.5 percent), apparel (0.7 percent) and airline fares (1.1 percent). That helped overall inflation come down slightly more than analysts were expecting. Indeed, October marked the smallest 12-month increase since the period ending in January.

Voters in Tuesday's elections told exit pollsters that inflation was among the most important issues swaying their choice, and nearly half of voters said jobs and the economy were the most pressing issue facing the country.

In a desperate bid to get prices down to normal levels, the Fed is raising interest rates at its most forceful pace in decades. But progress has largely been limited to the housing market, and officials have made clear they have a long way to go before letting up. A growing number of economists and Democratic lawmakers say they're concerned that the Fed will end up slowing the economy so much that it causes a downturn next year.

"We're already seeing it hit in housing, and now the spillover effects are going through," said Diane Swonk, chief economist at KPMG, pointing to discounts on furniture and appliance manufacturers pulling back on production. "But that doesn't mean the Fed stops."

In the past year, inflation emerged as a fraught political issue in the run-up to the midterm elections. Republicans were hoping to seize major gains in Congress by attacking Democrats' sprawling spending measures from earlier in the pandemic, arguing that trillions of dollars in government funds helped push the economy into overdrive. But although control of Congress is still undecided, the issue appears not to have driven anything like the backlash the GOP was seeking.

President Biden on Wednesday pointed to Democrats' moves to lower prescription drug costs and a steady fall in gas prices since their summer peak. "I can't guarantee that we're going to be able to get rid of inflation," he told reporters. "But I do think we can."

"I am optimistic — because we continue to grow, and at a rational pace — we are not anywhere near a recession right now," he said at a news conference to discuss the election results. "I'm convinced that we're going to be able to gradually bring down prices so that they, in fact, end up with us not having to move into a recession to be able to get control of inflation."

So far, the labor market remains hot and has proved remarkably resilient to the highest inflation levels in 40 years. But that could change if employers start nixing their plans to hire new workers — or lay people off altogether. Already, Silicon Valley is taking a hit, with major companies shedding workers in recent weeks. Facebook parent company Meta announced plans on Wednesday to cut more than 11,000 jobs, or 13 percent of its workforce, and is extending its hiring freeze through March.

Getting control of inflation is the Fed's job, and the central bank's power lies in interest rates. Higher rates cool off demand in the economy by making all kinds of borrowing — from mortgages to business loans — more expensive. Last week, the Fed hiked rates for the sixth time this year, announcing a fourth consecutive hike of 0.75 percentage points. Fed Chair Jerome H. Powell emphasized that his colleagues were a long way from finished, saying, "We have a ways to go."

With that commitment comes the growing likelihood that the economy could enter a recession in 2023 once the full weight of the Fed's rate hikes wash over the economy.

"Has it narrowed? Yes. Is it still possible? Yes," Powell said last week of the prospect of achieving what's known as a "soft landing." "I think we've always said it was going to be difficult, but I think to the extent rates have to go higher and stay higher for longer, it becomes harder to see the path."

There are few signs that the Fed's all-out effort is working yet. Prices in September rose 8.2 percent compared with the year before, and 0.4 percent compared with August, more than analysts' expectations. Core inflation, a measure closely watched by the Fed that strips out more volatile categories such as food and energy, also came in hot.

A major question is whether prices can be tamed with rate hikes alone. The Fed's decisions can't fix certain sources of inflation, like bungled supply chains, worker shortages or Russia's war in Ukraine.

In Lansing, Mich., Jerry's Automotive is still having issues getting enough engines and transmissions in stock. Owner Chris Luoma said he can only absorb so many costs, and he tries to be honest with customers about the supply chain issues that have long dogged the car market, saying that "you've got to stay open, stay in business and pay the bills."

Luoma said his shop made it through the pandemic in part because people had a cushion of savings they could use to pay for repairs and they often didn't want to hunt for a new car. The shop has been around for over 50 years, and Luoma hopes it'll make it through the uncertainty ahead. People always need their cars fixed, after all.

"While a recession might make us step back and think … we've seen peaks and valleys with the economy," Luoma said. "And we've always managed to be OK."

With the latest batch of inflation data, analysts and Fed officials are likely to pay special attention to rental costs, which make up a large portion of what economists refer to as the "basket of goods" used to calculate what's known as the consumer price index. So far, rents are showing little improvement. Rent costs rose 0.8 percent in September, up slightly from the previous two months. It was also up 7.2 percent in the past year, marking the largest increase since 1982.

But the hope is that, eventually, a major slowing in the housing market will pull rental costs down, too. The housing market is the main part of the economy that has responded to the Fed's rate hikes, since mortgage rates are especially sensitive to the central bank's decisions. The average rate for a 30-year fixed mortgage, the most popular home-loan product, reached 7.08 percent in late October, causing more prospective buyers to bow out of the market.

As a result, home prices are falling, demand for mortgages is plummeting and, in October, builder confidence fell for the 10th month in a row. On Wednesday, the real estate firm Redfin said it would lay off more than 860 workers, or about 13 percent of its staff, as business fell off.

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