U.S. headline inflation eases slightly year-on-year in October, core rate firms

Headline inflation in the U.S. eased slightly on year-on-year basis in October. The consumer price inflation rose modestly by 0.1 percent sequentially and ebbed slightly to 2 percent year-on-year from September’s 2.2 percent. The modest rise in October is consistent with market projections.

Prices of energy dropped 1 percent sequentially in October, partially given back the hurricane-induced bump-up in August and September. Sequentially, food prices remained unchanged, whereas they rose just 1.3 percent year-on-year.

Meanwhile, core inflation finally firmed in the month, rising 0.2 percent sequentially and rising to 1.8 percent year-on-year. The shelter index mainly drove up the core rate, with both rent and owners’ equivalent rent firming 0.3 percent on the month.

Rises in core inflation were broad based. Core goods and core services are going in the same direction, rising 0.1 percent and 0.3 percent respectively and taking core inflation higher. Core services rose 2.7 percent year-on-year, the most rapid rate since February. On a year-on-year the core good prices are still down 1 percent, reflecting past strength in the U.S. dollar.

The report released today should remove any doubts that the Fed will hike rates in December. Looking from the view of full-employment, the argument for rate hikes is strong, noted TD Economics.

At 15:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was slightly bearish at 20.5451. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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