US consumer prices increase more than expected in November

[WASHINGTON] US consumer prices rose more than expected in November, which could further support the Federal Reserve's intention not to cut interest rates again in the near term after reducing borrowing costs three times this year.

The Labour Department said on Wednesday its consumer price index increased 0.3 per cent after gaining 1.8 per cent in October.

Economists polled by Reuters had forecast the CPI climbing 0.2 per cent in November and rising 2.0 per cent on a year-on-year basis.

Excluding the volatile food and energy components, the CPI rose by 0.2 per cent, matching October's increase. The so-called core CPI was up by an unrounded 0.2298 per cent last month compared to 0.1572 per cent in October. It was lifted by gains in healthcare and prices of used cars and trucks, recreation and hotel and motel accommodation.

In the 12 months through November, the core CPI increased 2.3 per cent after a similar gain in October.

The Fed tracks the core personal consumption expenditures (PCE) price index for its 2.0 per cent inflation target. The core PCE price index rose 1.6 per cent on a year-on-year basis in October and has undershot its target this year. November PCE price data will be published later this month.

Fed officials were due to conclude a two-day policy meeting later on Wednesday. The US central bank is expected to keep rates on hold after reducing borrowing costs in October for the third time this year. It has signaled a pause in the easing cycle that started in July when it cut rates for the first time since 2008.

November's firmer inflation readings followed a report last Friday showing the economy added a robust 266,000 jobs in November and the unemployment rate fell back to 3.5 per cent, its lowest level in nearly half a century.

Other data on housing, trade and manufacturing have also been relatively upbeat, and suggested the economy was growing at moderate speed rather than stalling. In November, gasoline prices rose 1.1 per cent after rebounding 3.7 per cent in October. Food prices edged up 0.1 per cent, rising for a third straight month. Food consumed at home gained 0.1 per cent.

Owners' equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, increased 0.2 per cent last month, matching October's rise. The rent index gained 0.3 per cent after edging up 0.1 per cent in October, which was the smallest gain since April 2011. It was lifted by a 1.1 per cent rebound in the cost of hotel and motel accommodation after tumbling 3.8 per cent in October.

Healthcare costs rose 0.3 per cent in November after surging 1.0 per cent in October, which was the most since August 2016. Apparel prices nudged up 0.1% last month after declining 1.8 per cent in October.

New vehicle prices fell for a fifth straight month, likely because of deep discounting by automakers trying to get rid of stocks of older models. Used motor vehicles and trucks prices increased 0.6 per cent after rising 1.3 per cent in October. 

REUTERS