Economy

U.S. core inflation rate remains muted

U.S. core inflation rate remains muted”

Consumer prices advanced 1.8 percent year-on-year in September, the same rate as seen in August.

U.S. Treasury yields dipped and the dollar rose slightly on Thursday as investors awaited U.S. inflation data while Wall Street stock indexes fell as earnings season kicked off with a whimper.

While investors cheered an increase in the USA producer price index (PPI) for last month announced Thursday, inflation concerns were still in focus ahead of consumer price index (CPI) data on Friday after Federal Reserve minutes showed a more guarded view. The jump in gasoline prices was the largest since June 2009 and followed a 6.3 percent gain in August. However, when food and energy were stripped out, the core CPI increased only 0.1 percent, or 1.7 percent on a year-on-year basis. Over the past 12 months, food prices are up 1.2%. Gasoline prices surged 13.1 percent last month, accounting for 75 percent of the rise in the CPI.

USA producer prices rose in September as the price of gasoline recorded its biggest gain in more than two years amid hurricane-related production disruptions at oil refineries in Texas. The catalyst behind the precious metals strength was low inflation's impact on the pace of US interest rate hikes by the Federal Reserve. The Fed tracks the personal consumption expenditures (PCE) price index excluding food and energy.

At the end of the session, the financial markets had priced in a roughly 83 percent probability of a rate increase in December, according to the CME Group FedWatch tool.

"The sudden increase in retail demand is likely to cause third-quarter growth to come in somewhat better than expected before the hurricanes hit", said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

The core PCE index, which is preferred by the Fed, has consistently undershot the Fed's two percent target for more than five years. Minutes of the Fed's September 19-20 meeting published on Wednesday showed "many participants expressed concern that the low inflation readings this year might reflect not only transitory factors, but also the influence of developments that could prove more persistent". Owners' equivalent rent of primary residence rose 0.2 percent after advancing 0.3 percent in August. It fell 0.01 percent to 93.09 as of 1710 GMT.

There were also decreases in the cost of medical care, apparel, and household furnishings.

As for other precious metals, silver for December delivery rose 14.5 cents, or 0.84 percent, to close at 17.411 dollars per ounce. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.



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