United States (4E) – U.S. core inflation saw a year-on-year uptick for the first time since January, making a strong case for investors to expect the Federal Reserve to rate hikes in December.
Data from the U.S. Labor Department showed that consumer-price index rose 0.1% m/m (matching est.) after 0.5% rise the prior month; increased 2% y/y (matching est.)
Excluding food and gas, the so-called core CPI — the more preferred gauge for the central bank when making monetary policy decisions – inched up 0.2% (matching estimates) after rising 0.1% in the prior month while growing 1.8% (surpassing the 1.7% estimate) from 1.7% a year ago.
The CPI is the broadest of three price barometers from the Labor Department because it includes all goods and services. About 60 percent of the index covers the prices that consumers pay for services ranging from medical visits to airline fares, movie tickets and rents.
A separate report on Wednesday showed steady demand from U.S. consumers, as retail sales rose in October compared with the median estimate of analysts for no change.
The report, “a reflection on the fairly solid economic environment we’re currently enjoying,” may help cement investors’ expectations that the Fed will raise interest rates in December for the third time this year as some central bank officials have been casting doubt on a tempered inflation rate that may not provide a sufficient reason to hike borrowing rates, according to Russell Price, senior economist at Ameriprise Financial Inc. in Detroit.
“Inflation is moving closer to the Fed’s target on the core. A December rate hike seems fairly certain, and justifiable… the outlook for consumer spending looks good,” Price was quoted.
Fed officials next month are expected to update their projections for the benchmark interest rate.
Food costs unchanged from previous month while the CPI for new vehicles fell 0.2 percent; air fares rose 0.6 percent.
Shelter costs advanced 0.3 percent, including a 1.6 percent increase in lodging away from home; 0.3 percent increase in owners’ equivalent rent, one of the categories designed to track rental prices.
Meanwhile, medical care expenses rose 0.3 percent; these readings often vary from results for this category within the Fed’s preferred measure of inflation due to different methodologies
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