WASHINGTON – Rising energy costs pushed consumer prices higher in October, but overall inflation remains tame.
The Labor Department said Thursday that its consumer price index rose 0.4 per cent last month, the most since April and up from a 0.3 per cent increase in September. Over the past year, consumer prices are up 1.6 per cent. That’s the most since October 2014 but below the Federal Reserve’s 2 per cent annual inflation target.
Despite low inflation, the Fed has hinted that it might resume raising U.S. interest rate at its next meeting Dec. 13-14. The Fed raised rates nearly a year ago for the first time since 2006 and was widely expected to follow up with several more hikes in 2016. But it held off as the U.S. economy stalled from late 2015 through mid-2016 and the global economy continued to look weak.
Energy prices rose 3.5 per cent last month, led by a 7 per cent hike in gasoline prices. The cost of shelter rose 0.4 per cent on a 1.8 per cent rise in hotel rates. Food prices were unchanged for the fourth straight month. Medical care prices were also flat.
Core inflation, which strips out volatile food and energy costs, rose a modest 0.1 per cent last month and is up 2.1 per cent over the past year.
A steady uptick in consumer prices, along with President-elect Donald Trump’s plans to cut taxes and increase infrastructure spending, mean “inflation risks for the foreseeable future are to the upside,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a research report.
Testifying before a congressional committee Thursday, Fed Chair Janet Yellen described an improving U.S. economy and said “the case for an increase” in interest rates has strengthened.