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US inflation data strengthen Fed rate hike outlook
The US dollar was lifted higher on Tuesday after upbeat US inflation data. US inflation at the retail level ticked just slightly higher in October from the year prior amid a continued drag from energy prices. But a more closely-watched core reading held within striking range of the Federal Reserve’s target.
Consumer prices ticked up 0.2 per cent in October on a year-over-year basis, compared to expectations of a rise of 0.1 per cent, after flat-lining in September.
Excluding the more volatile food and energy components, prices were up 1.9 per cent from the year prior, matching both forecasts and the pace logged in September.
Measures of inflation have been pressured in recent months by a sharp drop in the price of oil and other commodities that began in summer 2014, but continued into early 2015.However, core levels have suggested inflation has been moving close to the Fed’s stated target of 2 per cent year-over-year growth. Notably, though, core consumer price expenditures, which is the Fed’s preferred gauge, is still lagging at a pace of 1.3 per cent.
Policymakers, including Fed chief Janet Yellen, have said they would be comfortable increasing interest rates for the first time in almost a decade if it appears inflation is moving toward its goal. Some, including Boston Fed head Eric Rosengren, have also noted that with the unemployment rate nearing what many see as its structural level, inflation is likely to continue heating up.
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