"It's the same as we've seen for a while now -- inflation running below where the Fed would like it. Overall, the prospects are better for next year than this year so that should maybe add a little pressure to the commodities front" and boost prices."
- Michael Carey, chief economist at Credit Agricole CIB
Tuesday's inflation report was the last standing in a queue of important economic data before the FOMC meeting, hence, it can play a decisive role in Bernanke's decision. Even despite the mixed signals from consumer prices, the greenback managed to strengthen against the shared currency, with the EUR/USD cross hitting 1.3745.
A report from the Bureau of Labor Statistics showed the cost of living in the world's largest economy remained unchanged in November, following a 0.1% drop in the preceding month. The majority of analysts, however, expected a 0.1% advance. On a yearly basis CPI ticked up 1.2% from a 1.0% rise in October. The so-called core measure, which strips out volatile prices, accelerated 0.2% in November, in line with projections. That took the gain over the last 12 months to 1.7%, and posting a third straight monthly increase.
While the Federal Reserve targets 2% inflation, they are tracking a gauge which usually runs slightly below the CPI. Some of the Fed officials have expressed their concerns over the weak inflationary pressure, and it can be named as the main reason that can prevent the U.S. central bank from starting tapering its stimulus programme already this month. Key fundamental data including payrolls, unemployment, retail sales and industrial output are all suggesting the economy is on an upswing.
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