U.S. consumer prices recorded their biggest increase in six months in October on rising gasoline costs and rents, the government reported Thursday, suggesting an increase in inflation that potentially clears the way for the Federal Reserve (Fed) to raise interest rates in December. The Labor Department said its consumer price index (CPI) increased 0.4 percent last month after rising 0.3 percent in September. In the last 12 months, the CPI has increased 1.6 percent, the biggest year-over-year gain since autumn 2014. Gasoline prices jumped 7 percent in October after advancing 5.8 percent the previous month. Gasoline accounted for more than half the CPI increase last month. Food prices were unchanged for a fourth consecutive month. Rents rose 0.4 percent, and medical costs were flat. Underlying inflation remained moderate. Core CPI, which excludes volatile energy and food costs, rose only 0.1 percent in October after a similar gain the previous month, slowing the 12-month increase in core CPI to 2.1 percent. The Fed has a 2-percent inflation target and tracks an inflation measure that currently is at 1.7 percent. The improving inflation outlook and a labor market that is nearing full employment likely will encourage the U.S. central bank to raise borrowing costs at its December 13-14 policy meeting. Inflation might accelerate in coming years if President-elect Donald Trump's proposal to increase infrastructure and defense spending is implemented. The fiscal stimulus, combined with full employment, would create a much faster pace of interest-rate increases than currently expected.
