December 15, 2007	Saturday	Zilhaj 4, 1428

WASHINGTON, Dec 14: High oil prices drove US consumer inflation to the fastest pace in more than two years last month, data showed on Friday, raising concerns the Federal Reserve will hold back from further interest rate relief.

US consumer prices surged 0.8 per cent in November while the closely watched core inflation index rose 0.3 per cent, the Labour Department reported.

The one-month gain in the headline consumer price index (CPI) was the largest since September 2005, while the core index had the biggest increase since January.

The November jump in inflation beat Wall Street forecasts of a 0.6 per cent increase in the headline CPI and a 0.2 per cent rise in the core.

Core prices gained 0.3 per cent in November after five consecutive months of 0.2 per cent gains.

On a 12-month basis, the overall rise was 4.3 per cent from November 2006, the highest since June 2006, and core inflation was at 2.3pc, the highest since April.

“The largest rise in the headline index since Hurricane Katrina ravaged Gulf of Mexico energy production, coupled with an uptick in the core rate, may well be the first clear sign that months of soaring and volatile energy prices are seeping their way into consumer prices at large,” said Kenneth Beauchemin, US economist at Global Insight.

The stronger-than-expected rise in inflation could pressure the Federal Reserve, which has cut interest rates one percentage point since September to ease tight credit that is threatening economic growth.

The latest quarter-point cuts, on Tuesday, disappointed investors who had clamoured for a half-point reduction to counteract a deepening housing and credit crisis.

The Fed has an implicit “comfort zone” target of two per cent inflation and the inflation surge in November could argue against a further rate pullback.

“This news is disconcerting ... it reflects the inflationary pressures noted in the most recent Fed policy statement that may have been a factor in holding the Fed back from cutting rates even more,” said Dick Green, an analyst at Briefing.com.“Sluggish economic demand should keep inflation from rising substantially, however, so there is no reason to push the panic button on inflation -- but we fully expect some in the market to do just that,” he added.—AFP