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Biggest rise in US consumer inflation in 2 years

WASHINGTON – UNITED States consumer prices rose the most in more than two years last month on record energy costs, reinforcing the Federal Reserve’s concern that inflation remains a risk to the economy.

The consumer price index increased 0.8 per cent after a 0.3 per cent gain in October, the Labour Department said yesterday. Prices excluding food and energy climbed 0.3 per cent, also more than anticipated.

The report sent stocks skidding in early trading, with the Dow Jones Industrial Average dropping by 110.47 points to 13,407.49 half an hour after the market opening.

A separate report showed that industrial production rose last month after falling in October.

The figures may re-ignite concern that inflation will accelerate, as higher energy costs filter through to other goods and services. That leaves less room for the Fed to cut interest rates should the credit crisis intensify and the economy falter, economists said.

‘There is no question inflation is going to remain a concern for policymakers,’ said Mr David Resler, chief economist at Nomura Securities International in New York.

‘This certainly will give some policymakers pause about the advisability and desirability of further rate cuts.’

Consumer prices increased 4.3 per cent in the 12 months to November, the most since June 2006. The monthly gain was the biggest since September 2005.

The core rate increased 2.3 per cent in the 12 months to November, up from a 2.2 per cent year-on-year gain in October.

Meanwhile, industrial production increased 0.3 per cent last month, exceeding the median forecast of 0.2 per cent, after a 0.7 per cent drop in October that was bigger than previously estimated, Fed figures showed yesterday.

 

Source: BLOOMBERG NEWS (The Straits Times 15 Dec 07)

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