US inflation accelerated in October with the fastest pace on year-on-year basis in two years. This is another signal that inflationary pressures in the economy increases. The consumer price index grew by 0.4% mom in October, according to the Ministry of Labor. Without the volatile prices of food and energy, the so called core inflation has accelerated with 0.1%. However, the forecasts of the analysts was the overall inflation to accelerate by 0.4% and core by 0.2%. The higher gasoline prices and housing are the main reason for the growth.
Compared to last year, the overall inflation has accelerated to 1.6% in October, while the core inflation accelerated to 2.1%.
The consumer prices increased in seven of the last eight months, and their growth accelerated since the summer. Hurrying increase indicator of inflation than real zero a year ago to accelerating rate that corresponds stronger stable growing economy.
Inflation was generally low in recent years, mainly due to the drop in energy prices, this effect now fades. The Fed targets annual inflation rate of 2%, which is neither too weak nor a sign of overheating economy.
The report provided further confirmation of strong energy base effects boosting headline CPI. Although core inflation rose less than expected, we still believe that domestic price pressures remain strong.
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