US consumer prices post largest rise in nine months

[WASHINGTON] US consumer prices increased by the most in nine months in October amid gains in the cost of gasoline and rents, pointing to steadily rising inflation that likely will keep the Federal Reserve on track to raise interest rates again next month.

The Labor Department said on Wednesday its Consumer Price Index rose 0.3 per cent last month after edging up 0.1 per cent in September. In the 12 months through October, the CPI increased 2.5 per cent, picking up from September's 2.3 per cent rise.

Excluding the volatile food and energy components, the CPI climbed 0.2 per cent. The so-called core CPI had gained 0.1 per cent for two straight months.

In the 12 months through October, the core CPI increased 2.1 per cent after advancing 2.2 per cent in September.

Economists polled by Reuters had forecast the CPI climbing 0.3 per cent and the core CPI gaining 0.2 per cent in October.

US Treasury yields briefly declined before turning higher after the data while the dollar held its losses against a basket of currencies. US stock index futures were trading higher.

Inflation pressures are building, partly driven by the lowest unemployment rate in nearly 49 years and strong domestic demand. Annual wage growth recorded its largest increase in 9-1/2 years in October.

The Fed, which has a 2 per cent inflation target, tracks a different measure, the personal consumption expenditures (PCE) price index excluding food and energy, for monetary policy.

The core PCE price index has increased 2.0 per cent for five straight months.

The US central bank left interest rates unchanged last Thursday, but is expected to increase borrowing costs in December for a fourth time this year. In its statement after last week's policy meeting, the Fed noted that annual inflation measures "remain near 2 per cent."

Last month, gasoline prices rebounded 3.0 per cent, accounting for more than one-third of the increase in the CPI, after slipping 0.2 per cent in September.

Food prices fell 0.1 per cent after being unchanged in September. Food consumed at home declined for a second straight month in October. Food prices were held down by cheaper bread, cereals, pork, dairy products, fruits and vegetables.

Owners' equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, rose 0.3 per cent in October after advancing 0.2 per cent in the prior month. The rent index gained 0.2 per cent.

Healthcare costs increased 0.2 per cent last month after a similar gain in September. Apparel prices edged up 0.1 per cent after jumping 0.9 per cent in September.

There were also increases in the costs of household furnishings and used motor vehicle and trucks as well as motor vehicle insurance and tobacco.

But prices for new motor vehicles dropped 0.2 percent last month. Communications costs fell as did prices for recreation and personal care products.

REUTERS