Saturday 18 December 2004

US CPI up modestly in November

Moderating oil prices helped keep consumer prices in the United States down in November, according to the US Labor Department. The consumer price index (CPI) was up only 0.2 percent after a 0.6 percent jump in October. The core CPI -- excluding energy and food -- was also up 0.2 percent, maintaining the pace in October.

In the face of likely further declines in the US dollar, it remains to be seen whether inflation can be kept low going forward. Having said that, the fact that it has kept as low as it has despite strong economic growth in the US and surging commodity prices worldwide testifies to the residual deflationary forces that linger in the global economy and which gives the Federal Reserve reason to raise interest rates at a "measured" pace.

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