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US Inflation up Slightly, Raising Chance of Interest Rate Hike

  • VOA News

FILE - The U.S. Federal Reserve Board building is shown behind security barriers in Washington.

FILE - The U.S. Federal Reserve Board building is shown behind security barriers in Washington.

A key measure of U.S. inflation rose slightly in October, boosting the chances the central bank will raise interest rates soon.

A government report says prices gained two-tenths of one percent in September. Apart from energy and food, sectors with volatile price changes, U.S. consumer prices rose 1.9 percent over the past year — close to the Federal Reserve's target of two percent.

Experts say a modest and consistent rate of inflation allows families and companies to better plan purchases of homes and equipment, which facilitates economic growth.

Fed officials have said they want to see inflation rise a little before they boost interest rates. They are widely expected to raise the key rate in mid-December from the record low level where it has been since the financial crisis.

The idea behind lowering interest rates that reduced borrowing costs would bolster economic growth. Now that unemployment has fallen from 10 percent to five, some economists say the emergency stimulus measure is no longer needed. They say raising the rate will give the Fed room to stimulate the economy again when the next downturn hits.

A separate report said the U.S. manufacturing sector rose a brisk four-tenths of a percent in October, after falling the prior month. Manufacturing has been hampered by slowing demand in foreign markets. The strong dollar also hurts U.S. exports, including manufactured goods, by making them more expensive and less competitive on global markets.

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