The US Consumer Price Index shows cost of living has risen in October

The US Dollar rose unassumingly against an assortment of currencies after the release of data about the labor market conditions. There is an underlying hope that the tightening of the labor market will have a positive impact on the jobless rate that officials are dubbing as consistent with full employment. There is a 70 % chance of a December rate hike according to CME Group’s Fed Watch.

There is a month’s gap between today and the next meeting of the Fed Reserve’s rate-setting committee and experts are splitting the semantic hair trying to figure out what will push the Fed to raise the rates next month.

The terror strike in Paris has an effect on the Fed thinking, but its thinking is more affected by the US Consumer Price Index. The cost of living has risen in October, and this is good news because it is the first rise in two months. The price index had fallen in both August and September by 0.2%.The inflation is also bordering the range that will make the Federal Reserve happy.

The year-over-year growth in October or the so-called core consumer prices, which includes everything excluding energy and food was hovering at 1.9% that is close to the 2% deemed safe by the Fed itself. It all points to a healthy economic rate and a possibility of a December hike.

On the other hand, the CPI report will not be a big deal. The core rate has moved by a trivial percentage and was 1.8% in August and 1.9% in September. So there is no drastic change in the picture, and the situations are much akin to the days when the Feds met, in September and October.

FTN Financials chief economist, Chris Low, pointed out that though the core CPI is close to the Fed’s 2% inflation target the core PCE is, of course, much lower at 1.3%. It has been blamed on the housing sector. The CPI treats the housing as an investment while the PCE treats housing as consumption. Therefore the consumer price report is important, it is still inferior to the Fed’s key benchmark of inflation, the core rate of the personal consumption expenditures index.


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