The annual inflation rate in the US dropped by more than expected in October, suggesting that the worst of the post-COVID price spike is over and strengthening possibilities of an early end to the ongoing cycle of interest rate hikes.

Consumer prices increased 7.7 per cent from a year earlier, down from 8.2 per cent in September and clearly below the 8.0 per cent consensus forecast. The current price dynamic also eased more than expected, with overall prices increasing only 0.4 per cent on the month, down from 0.6 per cent in September. Core prices, which strip out volatile energy and food elements, are rising 0.3 per cent, rather than the 0.5 per cent expected.

The headline inflation rate has declined four months in a row from a peak of 9.1 per cent in June. At 7.7 per cent, it’s now at its lowest rate since January.

Financial markets responded strongly to the news. Federal Reserve Chair Jerome Powell had forced the market to expect that the central bank would keep rates higher than thought for longer than thought. The CPI numbers triggered a rapid reappraisal of that scenario.

Reportedly, the dollar index tumbled 1.5 per cent to trade at 108.78, its lowest in nearly two months. S&P 500 Futures leapt by 3.2 per cent and Nasdaq 100 Futures by 4.2 per cent in anticipation of a major turning point in the cycle.