Food prices inched up by 0.1 percent in October after climbing by 0.4 percent in September, while energy prices rose by 0.3 percent after plunging by 4.7 percent in the previous month.
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“Inflation is negative in the United Kingdom but we must be ready for this support for consumption to fade as we enter 2016”, said Jeremy Cook at World First. “It will take a long time for inflation to return to target” and there is still “very little pressure” for officials to raise interest rates soon, she said.
The consumer-price index rose a seasonally adjusted 0.2% in October, after two months of declines, the Labor Department said Tuesday.
However, inflation still remains well below the Bank of England’s 2% target, which means an interest rate rise is unlikely this year, according to Khalaf.
Over the year, core prices increased 2.5 percent, due mainly to higher shelter, apparel and education and communication prices.
Oxford Economics lead economist Martin Beck said: “We think CPI inflation is likely to have run at a similar negative rate in October”. Yet even core inflation has hovered below the Fed’s goal.
Still, the other major services categories – transportation (up 0.22% month-over-month), recreation (up 0.36% month-over-month) and education and communication (up 0.37% month-over-month) – all posted inflation gains above their recent history.
While the U.S. Department of Labor’s monthly reading of 0.2% sounds low, the Federal Reserve is looking at inflation for up to 2.0% to 2.5% in order to justify raising the fed funds rate. Americans have been shielded from inflation largely because of lower energy prices coupled with a strong dollar that has made imports such as clothes and cars less expensive.
A report that indicates an increase in manufacturing output is another indication that economic growth may accelerate in the fourth quarter. “But the outlook for the rest of the world is more sombre”.
The market agrees with that assessment, as the CMEGroup’s Fedwatch tool puts the current implied probability of a December rate hike at 68 percent. Stocks on Wall Street rose, boosted by better-than-expected earnings from Wal-Mart WMT.N and Home Depot HD.N .
It charted a 2% overall increase in prices for clothing and footwear – the largest September to October increase since official records began. Likewise, the core service is increasing at a pace of 0.3%m/m.
In the 12 months through October, the core CPI increased 1.9 percent after rising by the same margin in September.
Manufacturing has been weak lately but that seems to be changing.
Energy prices, including gasoline and electricity, rose last month.
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Still, overall inflation has risen just 0.2% in the past year, mainly because of a huge drop in oil prices.
