U.S. inflation jumps, boosting likelihood of rate hike

U.S. inflation jumps, boosting likelihood of rate hike thumbnail

Underlying U.S. consumer prices saw their biggest jump in 11 months in December, boosting expectations that inflation will keep the Federal Reserve on the path of raising interest rates.

The Consumer Price Index (CPI), which excludes volatile food and energy components, rose 0.3 per cent last month from November, compared to expectations of a 0.2 per cent increase by a Reuters poll of economists.

That is the biggest gain for what is considered the “core” CPI since January 2017. It increased 1.8 per cent in the year to December.

“This, along with the solid retail sales report for the same month, supports our expectation for a March rate hike by the Fed,” said Jennifer Lee, senior economist at BMO Capital Markets.

Retail sales rose 0.4 per cent in December from the previous month and was up 5.4 per cent from a year earlier on the back of higher costs for motor vehicles.

The U.S. central bank is forecast to hike its benchmark interest rate three times this year after making three similar hikes last year.

Friday’s data prompted some economists to reiterate an even more bullish view of the Fed’s monetary policy.

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