United States Inflation

United States

United States: Inflation inches down in November

December 15, 2010

Consumer prices in the United States rose a seasonally adjusted 0.1% in November, representing the fifth consecutive month of monthly price increases. The price rise surprised the market on the downside, as analysts had expected prices to add 0.2%. As a result of the soft monthly price rise, annual headline inflation inched down a notch over October to 1.1%. The moderate reading reflected weaker-than-expected price increases for food and energy, which rose only 0.2% over the previous month. The core inflation index, which does not include food and energy prices, ended three consecutive months of flat readings with a rise of 0.1% over the previous month. As a result, annual core inflation inched up to 0.8% in November, after registering a record low of 0.6% in October. In the statement of the December meeting, the Federal Open Market Committee (FOMC) confirmed that the current level of inflation remains too low relative to that it judges consistent with its dual mandate of price stability and full employment. Hence, the Fed announced that it will maintain its purchases of securities in order to foster maximum unemployment and price stability. The Fed anticipates PCE inflation (based on the price index for personal consumption expenditures) to average between 1.2% and 1.4% this year, and to rise to between 1.1% and 1.7% in 2011. Consensus Forecast participants see inflation averaging 1.6% this year, which is unchanged from last month's forecast. For 2011, the panel anticipates average inflation inching down to 1.4%, which is also unchanged from last month's estimate.

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