"The economy is generating enough heat to produce some inflation, even if the Fed has worries about the long-term trend for economic growth being too weak to lift interest rates much higher for now".
- Chris Rupkey, MUFG Union Bank
US consumer prices rose most since April last month, driven by a surge in gasoline and rental prices. On Tuesday, the US Department of Labor said its Consumer Price Index advanced 0.3% in September, following the preceding month's gain of 0.2% and meeting analysts' expectations. On an annual basis, the CPI climbed 1.5%, posting the biggest year-over-year rise since October 2014 and surpassing August's 1.1% increase. Meanwhile, the so-called core CPI, which excludes food and energy prices, rose 0.1% month-over-month and 2.2% year-over-year in the same month after climbing 0.3% on a monthly basis and 2.3% on a yearly basis in August. Notwithstanding, today's disappointing core CPI data is unlikely to change the prospect of a Fed rate hike in December. The September increase was mainly driven by higher gasoline prices that surged 5.8% after falling 0.9% in August. The price of food remained unchanged for the fifth consecutive month in September. As to the core CPI, owners' equivalent rent of primary residence advanced 0.4%, following the 0.3% rise in August, while medical care costs grew 0.2%, compared to the preceding month's 1.0% hike. Hospital services prices held steady in September, whereas prescription drug costs climbed 0.8%.
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