U.S CPI clears way for Dec rate rise

15 November 2017

The U.S. consumer inflation rate fell back in October as higher housing costs were offset by lower fuel prices. Consumer price index (CPI) figures released by the Bureau of Labor Statistics indicated consumer prices rose by 0.1% in October, in line with market expectations. On a 12-month basis the consumer inflation rate fell back from September’s 2.2% to 2.0%.

Medical care, used vehicles, tobacco, education, vehicle insurance and personal care were among the categories where average prices increased. Average prices of the new vehicles, recreational activities and apparel categories all declined.

Core prices, a measure of prices which strips out food and energy price changes, rose by 0.2%, a rise from September’s increase of 0.1%. Both the monthly and 12 month core figures were in line with expectations. Annualised core inflation rose to 1.8% after spending five months unchanged at 1.8%.ANZ Rate Strategist Martin Whetton said the figures cleared the way for the U.S Fed to raise the Federal funds rate next month. “With the data broadly in line with expectations, and the details showing tentative signs that some of the factors that had weighed on inflation earlier in the year are abating, medical services especially, it seems fair to believe that a hike now looks locked and loaded.”