What happened: The Consumer Price Index (CPI) stayed flat in October after increasing 0.4% in September. Core CPI rose 0.2% month over month compared to 0.3% in September.

What it means: Today’s report shows disinflation resumed in October after the summer consumer spending binge. Slowing inflation is good news for the housing market. Annual growth in consumer prices fell to 3.2% from 3.7% a month ago. Core inflation over the past year eased to 4.0% from 4.1% in September. The prices of used cars, hotels and airline fares fell in October. 

What Zillow Senior Economist Orphe Divounguy thinks: The yield on the 10 year Treasury — which mortgage rates tend to follow — fell sharply on the news that inflation is slowing.

Market rent growth, including the Zillow Observed Rent Index (ZORI), has already leveled out and normalized. Rent growth measured in the CPI – which lags that of market rents by a year or more – is easing up as well. The 12-month increase in the Owner’s Equivalent Rent of Primary Residence fell to 6.9% in October from its peak at 8.1% in April. The annual increase in the Rent of Primary Residence slowed to 7.2% from its peak of 8.8% in March.

Market rent indicators like ZORI show rent growth is flattening. This is likely to continue so long as the rebalancing in the labor market continues and labor market tightness falls further. The unemployment rate has ticked up by 50 basis points since April due to an increase in labor supply and a slowdown in private sector hiring.

The latest data should keep the Federal Reserve off the economic brakes. Further good news of inflation easing, along with expectations for a slightly cooler economy, would help lower mortgage rates and offer some relief to cash-strapped buyers.

However, fiscal policy news and the once-again looming threat of a federal government shutdown could still cause a large reaction from bond markets that could take the economy off its glide path toward a soft landing.

Numbers to know: 

• The Consumer Price Index (CPI) was flat in October after increasing 0.4% in September. Consumer prices were 3.2% higher when compared to a year ago down from 3.7% in September.
• Core CPI increased 0.2% in October and is now up 4% from a year ago, down from 4.1% in September.