US consumer prices jumped 6.2 percent in October, the biggest inflation surge in more than 30 years.

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The headline CPI was up 0.9 percent in October over September taking the year-on-year headline to 6.2 percent, the highest since 1990. The core CPI rose 0.6 percent over September, against Street estimates of 0.4 percent, which is itself high. So, YoY core has hit 4.6 percent versus 4 percent at the end of September.

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According to Morgan Stanley, it is not the expected but the broadening into unexpected areas that's worrying, mostly the core services.

Core services were up 0.45 percent over September. Within this, shelter or rents and medical services rose the most and both have the tendency to persist. Rents were up 0.42 percent in October over 0.45 percent in September. Rents and housing are the single largest component in the CPI, accounting for a little over 30 percent.

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A few of the items going into CPI are also showing persistence, for instance, cars. The wholesale price of cars in November is showing gains and it looks likely to spill into December, Morgan Stanley said.

Meanwhile, the personal consumption expenditure or PCE is the most tracked index by the US Fed and it is what an average family spends on. Morgan Stanley is forecasting core PCE rise will be 0.41 percent in October and will therefore cross the 4 percent mark YoY.

While headline PCE will rise by 0.63 percent in October to touch 5 percent in terms of YoY growth. It is this number that can move the US Fed.

Watch the accompanying video of CNBC-TV18’s Latha Venkatesh for more details.

First Published:Nov 11, 2021 3:15 PM IST