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Inflation: U.S. consumer prices higher in October
The Consumer Price Index (CPI) for baked foods and cereal products increased 0.8% in October, rebounding from two consecutive month-over-month declines, according to the Bureau of Labor Statistics of the U.S. Department of Labor.
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The cost of consumer goods rose in October for the first time in three months owing to higher costs for rent and medical care, but overall USA inflation remained extremely low. “It does feel core inflation has firmed up a little bit this year and I would imagine it’d continue to do so as the economy continues to take up slack”.
The ONS also marked rises in the cost of eating and drinking out but saw downward price pressures for university tuition fees, food, alcohol and tobacco. The strong job market has traditionally justified higher Fed rates, except that the level of inflation associated with a stable economy has yet to materialize. Excluding the volatile food and energy categories, so-called core prices grew 0.2 per cent, the same as in September. US consumer prices rose modestly in October, 2015 as low gasoline costs and a strong dollar have suppressed inflation.
Fuel prices fell by 14 per cent compared to a year ago and energy costs were 4.1 per lower, while food and drink prices dropped by 2.7 per cent. The central bank has said that around four-fifths of the shortfall in inflation from its 2 percent target is due to short-run factors such as lower oil prices and a strengthening in sterling. There is an underlying hope that the tightening of the labor market will have a positive impact on the jobless rate that officials are dubbing as consistent with full employment.
“There is nothing that derails a December Fed rate hike in today’s data”.
In forecasts published this month, the BOE said inflation is likely to reach its goal in late 2017 and accelerate to 2.2 percent a year later.
The reason is that the consumer prices index (CPI) fell by 0.3% in November 2014 as a result of the plunging cost of crude oil.
Analysts had expected a rise of 1%, following the same increase in September.
The EUR/USD and GBP/USD also felt pressure from the bullish U.S. CPI data. The core CPI reading actually came in at 1.9% on the year-over-year reading for October.
The Fed prefers a different inflation gauge, the price index for personal consumption expenditures, which includes a broader range of goods and services consumed in the USA than the CPI and assigns them different weights.
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The price index for fresh biscuits, rolls and muffins in October was 178.5, up 1.3% from September and up 2.5% from October 2014.