Inflation in the US fell further in October compared to previous months. According to the US government, inflation was 7.7 percent last month, up from 8.2 percent in September. As a result, consumer prices have fallen for four consecutive months.

The peak seems to be behind us for now. Inflation rose to a 40-year high of 9.1 percent in June. The current 7.7 percent is slightly lower than economists who had forecast inflation to be 7.9 percent.

Excluding strongly volatile prices of energy and food, prices rose an average of 6.3 percent year-on-year, up from 6.6 percent in September. The figure was lower than the 6.5 percent forecast by economists.

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The rate of inflation is very important to the Federal Reserve, the US central bank, in determining whether interest rates should be adjusted. The central bank has already raised interest rates five times this year, four times with a record 0.75 percent. By raising interest rates, borrowing money becomes more expensive and less money is available, which should reduce inflation. However, interest rate hikes usually take several months to take effect.

Larger interest rate steps may be less likely

As inflation cools, interest rates may not need to be raised much in the near future. The central bank will meet again in December to discuss interest rate policy. At an earlier meeting earlier this month, Fed Chairman Jerome Powell had already hinted that interest rates could be raised in small steps. He noted that the central bank is likely to continue raising interest rates in the long term to push inflation back to its 2 percent target.

Investors react enthusiastically to low inflation figures. Shortly after the opening, the Dow-Jones index rose 2.4 percent to 33,336 points. The broader S&P 500 rose 3.5 percent to 3,880 points, while the tech benchmark Nasdaq rose 4.9 percent to 10,855 points.