U.S. Consumer prices rebounded more than expected in October and core inflation rose, which, coupled with declining trade tensions and fears of a recession, are fueling the Federal Reserve's signal for further reductions in interest rates in the near future.
The Labor Department said on Wednesday the consumer price index rose 0.4% last month as households paid more for energy products, health care, food and a number of other goods. This was the largest gain in the Consumer Price Index since March and was unchanged in September.
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Economists surveyed by Reuters estimated the CPI forecast grew 0.3% in October and gained 1.7% year over year.
Excluding volatile food and energy components, the Consumer Price Index rose 0.2% after a 0.1% increase in September. The so-called core consumer price index is rising as healthcare spending has jumped by more than three years. There was also an increase in the prices of used cars and trucks, as well as holidays and rentals.
In the 12 months to October, core CPI increased by 2.3%, after rising by 2.4% in September.
The Fed monitors basic personal consumption expenditures. (PCE) price index for its 2.0% inflation. The core PCE price index rose 1.7% year over year in September and failed to reach its target this year.
October Harder Monthly Reading of CPI and Jump in Healthcare Expenses Assume Last Month's Major PCE Price Index. The basic PCE pricing data will be released later this month.
The US Central Bank last month cut interest rates for the third time this year and signaled a pause in the easing cycle, which began in July when it cut borrowing costs for the first one. 2008 Time
Stable inflation comes in at the heels of quite optimistic data, including better-than-expected employment growth in October and accelerating activity in the services sector.
A de-escalation of trade tensions is also observed. between the US and China. President Donald Trump on Tuesday said Washington was close to signing a "first phase" trade deal with Beijing, but did not provide further details.
While the 16-month trade war between the US and China weighs on the manufacturing industry, the household sector remains stable.
In October, energy prices jumped 2.7%, after falling 1.4% in the previous month. Energy prices accounted for more than half of last month's consumer price index increase.
Gasoline prices rebounded 3.7% after falling 2.4% in September. Food prices rose 0.2%, rising for the second consecutive month. Food consumed at home gained 0.3%.
The equivalent rent of a prime home that a homeowner would pay to rent or receive a home increased by 0.2% in October, after rising by 0.3% in September. But other categories of shelter eased last month. The rental index rose 0.1%, the smallest increase since April 2011.
Health care costs increased by 1.0% last month, the highest since August 2016, after rising by 0, 2% in September. Clothing prices fell by 1.8% after falling 0.4% in the previous month.
Prices of used motor vehicles and trucks increased by 1.3%, after falling by 1.6% in September.