the us bureau of labor statistics released october’s cpi calculation on thursday november 10 before the markets opened while expectations were for an annual rate of 80 it came in at 77 stock markets exploded to the upside with the dow sp 500 and nasdaq indexes up 37 55 and 74 respectively as investors cheered the result to a degree the lower than expected inflation result was not a surprise as the index used to calculate it had only risen 017 over the previous three months one item to note is that when the inflation calculation is expanded to the thousands position the rate was 7745 the unadjusted indexes inflation index increased from 296808 to 298032 or 1224 points if it had increased by just another 002 points the yearoveryear rate would have ben 78 while markets would have probably still rallied they may not have risen as much first a warning the following is an extremely high level analysis without digging into the detailed components so they could be entirely off base all these forecasts do is assume a constant monthtomonth unadjusted index increase for the next eight or more months it does not dive into the major categories that make up the inflation index of shelter rent and owners equivalent rent of 326 of the index commodities less food and energy commodities of 212 food at 137 and energy at 80 to obtain a good understanding on why the shelter’s category impact on the inflation index can lag this is a good article by simon moore senior contributor at forbescom if the next six to nine months of monthtomonth change in the inflation index is similar to the past four month’s the yearoveryear inflation reading will continue to fall note that expectations for november’s yearoveryear inflation rate hover around 75 to 76 the inflation rate has fallen the past four months for the first six months of 2022 the monthly increase in the unadjusted index was between 1605 and 4015 it has since dropped down to two slightly negative readings in july and august a small increase in september and a slightly larger increase in october the average of the four months is a positive 043 if the index stays flat the yearoveryear rate will fall to 20 in may the fed could achieve its objective of a 2 yearoveryear inflation rate by mid2023 if the monthtomonth change in the inflation index is zero over the next seven months if the index increases 05 points per month if the unadjusted index increases by 05 points per month the yearoveryear inflation rate would fall to 32 in may and 19 in june next year if the index increases by 10 points per month if the unadjusted index stays at an elevated level of 10 point increase per month the yearoveryear inflation rate only falls to 33 in june and then starts to reaccelerate