U.S. inflation rate likely to increase further

U.S. headline inflation for November was remain steady in a month on month comparison, and increased by 0.5% year on year. Core inflation, on the other hand, increased by 0.2% month on month and 2.0% year on year on the same month. Core good inflation dropped by 0.2% m/m and 0.6% y/y was offset by rise in core service inflation of 0.3% m/m and 2.9% y/y.

Analysts argue the core goods prices are expected to increase in near future as a result of stronger dollar.

"In the near term we expect both core and headline inflation will firm as the base effects of past energy price declines and dollar appreciation begin to fade. However, renewed strength in the dollar since mid-year, particularly against EM currencies, and acceleration in the rate of decline in China PPI lead us to project a modest reversal in core inflation in 2016. Once this pass-through begins to fade, we then look for modest wage inflation to support non-shelter services inflation and a return of overall inflation to the Fed's target in 2017", argues Barclays.