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CPI prices flat in November in US
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United States consumer prices were flat in November, but a bounce back in the annual inflation rate from a four-year low will probably give the Federal Reserve cover to start dialing back its massive monetary stimulus.
The Labor Department said yesterday its Consumer Price Index was restrained last month by a fall in gasoline and natural gas prices, after slipping 0.1 percent in October.
In the 12 months through November, the CPI rose 1.2 percent. It had risen 1 percent in October, the smallest gain since October 2009.
“This is not a game changer. The composition of price changes suggests we are going to see sub-2 percent inflation for some time to come,” said Laura Rosner, economist at BNP Paribas in New York.
Economists polled by Reuters had forecast consumer prices nudging up 0.1 percent last month and increasing 1.3 percent from a year ago.
Stripping out the volatile energy and food components, the so-called core CPI rose 0.2 percent after rising by 0.1 percent for three consecutive months.
That took the increase over the past 12 months to 1.7 percent, rising by the same margin for a third straight month.
The Fed targets 2 percent inflation, although it tracks a gauge that tends to run a bit below the CPI.
The inflation report was released as Fed officials were due to start a two-day meeting to assess the economy and deliberate on monetary policy.
Though some Fed officials are concerned about inflation being too low, that will probably not stop the US central bank from reducing the pace of its monthly bond purchases.
Key data including employment, retail sales and industrial production have all pointed to an economy that is on an upswing.
Some economists expect it to announce a cut in its US$85 billion monthly bond buying program at the end of the meeting today, although more believe it will wait until January or March before trimming its purchases.
Persistently low inflation would probably serve as a caution to officials and see the Fed keeping interest rates low for a long time even after it begins to cut its bond purchases.
A 1.6 percent drop in gasoline prices and a 1.8 percent fall in the cost of natural gas offset increases in electricity, keeping inflation subdued last month.
Gasoline prices had dropped 2.9 percent in October, while natural gas prices had fallen 1 percent. Food prices rose 0.1 percent in November after ticking up by the same margin in October.
Within the core CPI, apparel prices fell for a third straight month in November, reflecting discounts offered by retailers to lure shoppers and reduce inventory.
There were, however, gains in rent, which accounts for about a third of the core CPI. The rent index added 0.3 percent after gaining 0.1 percent in October.
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