Prices in US rise at their slowest rate since 1958
Published 18/11/2010 | 05:00
US consumer prices rose at the slowest annual rate since 1958 -- helping to justify the decision by the Federal Reserve to inject another $600bn (€443.5bn) monetary stimulus in to the economy.
Consumer prices excluding food and fuel -- the gauge followed by central bankers -- increased 0.6pc from October 2009, the smallest gain in year-over-year data going back to 1958.
The numbers "provide some vindication for the Fed's decision," said David Resler, chief economist at Nomura Securities International Inc in New York. "It's not going to be a very robust economy."
The Fed decision this month to buy another $600bn in US government bonds sparked criticism from finance officials in Germany and China, Republican lawmakers and economists.
The central bank hopes to avert deflation, or a prolonged drop in prices, by keeping borrowing costs low to spur growth and adding extra dollars on top of the low interest rate of half a percent.
The consumer-price index increased 0.2pc in October from the previous month.
"You don't want inflation to be too high, but you also don't want it to be too low," Fed chairman Ben Bernanke stressed in a speech on November 6.
"There is no indication of inflation pressure," said Chris Low, chief economist at FTN Financial in New York.
"Given the criticism the Fed has taken recently, especially over the potentially inflationary aspects, it's very market friendly in that it should help push back against some of that criticism," he added.
The core inflation rate was also restrained by a deceleration in medical care costs and by cheaper vehicles and clothing.
Retailers are again turning to discounts to encourage consumers during the Thanksgiving holiday season.
JC Penney, the third-largest US department-store company, last week said the holiday shopping environment would "remain highly promotional".