Washington — US consumer prices increased by the most in nine months in October amid gains in the cost of fuel and rents, pointing to steadily rising inflation that will likely keep the Federal Reserve on track to raise interest rates again in December.
The labour department said on Wednesday its Consumer Price Index (CPI) rose 0.3% in October after edging up 0.1% in September. In the 12 months through October, the CPI increased 2.5%, picking up from September’s 2.3% rise.
Excluding the volatile food and energy components, the CPI climbed 0.2%. So-called core CPI had gained 0.1% for two straight months. In the 12 months through October, the core CPI increased 2.1% after advancing 2.2% in September.
Economists polled by Reuters had forecast the CPI climbing 0.3% and the core CPI gaining 0.2% 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 nine-and-a-half years in October.
The Fed, which has a 2% inflation target, tracks a different measure, the personal consumption expenditures (PCE) price index excluding food and energy, for monetary policy.
The core PCE index has increased 2% 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 in 2018. In its statement after last week’s policy meeting, the Fed noted that annual inflation measures “remain near 2%”.
In October fuel prices rebounded 3%, accounting for more than one-third of the increase in the CPI, after slipping 0.2% in September.
Food prices fell 0.1% 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% in October after advancing 0.2% in the prior month. The rent index gained 0.2%.
Healthcare costs increased 0.2% in October after a similar gain in September. Apparel prices edged up 0.1% after jumping 0.9% in September.
There were also increases in the costs of household furnishings and used motor vehicles and trucks, as well as motor vehicle insurance and tobacco.
But prices for new motor vehicles dropped 0.2% in October. Communications costs fell as did prices for recreation and personal care products.