Will In-Check Inflation Spur Growth?

Inflation appears to be in check in the U.S. as new October data released by the U.S. Labor Department on Thursday showed that cost of living rose at its slowest pace in three months. The U.S. Consumer Price Index increased 0.1 percent last month, in line with analysts’ expectations. It followed a 0.6 percent gain each in September and August.

The inflation outlook tallied with the U.S. Federal Reserve’s plan and will give policy makers the chance to work on encouraging growth. Low inflation allows the central bank to keep its interest rates close to zero without risking price increases, and lower interest rates, in turn, stimulate growth.

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“Inflation in the U.S. is very subdued,” BMO Capital Markets economist Sal Guatieri told Bloomberg. “This is allowing the Fed to strive toward supporting job growth and reducing unemployment.”

Gasoline prices — which had gone up 16.6 percent from July to September — fell 0.6 percent in October, pushing energy costs down 0.2 percent and helping in some recovery of consumer buying power. Food costs grew 0.2 percent. Excluding food and energy costs, the so-called core measure rose a higher-than-expected 0.2 percent. This was largely fueled by a 0.4 percent increase in the index for rents, while the rental value of owner-occupied houses rose 0.2 percent. Clothing costs grew 0.7 percent, hotel fares accelerated 0.5 percent, and airline fares shot up by 2.4 percent. Medical care expenses didn’t go up for the first time since July 2010, remaining unchanged, while the index for used cars and trucks fell 0.9 percent.

The Consumer Price Index is part of three monthly price measures from the Labor Department and is considered the broadest because it includes goods and services. Producer prices declined 0.2 percent last month, falling unexpectedly and for the first time in five months, while import prices grew 0.5 percent on increases in energy expenses.

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