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US prices jump most in two years US prices jump most in two years
(30 minutes later)
US inflation rose at its fastest pace in two years during November, spurred by higher energy prices, according to figures from the Labor Department. US inflation rose at its fastest pace in two years during November, spurred on by higher energy prices, according to figures from the Labor Department.
Consumer prices rose by 0.8% in November, above forecasts, while core inflation, which strips out energy and food prices, rose 0.3% month-on-month. Consumer prices rose 0.8% in November from October, more than many analysts forecast. Core inflation, which strips out energy and food prices, rose 0.3%.
Central banks in the UK and US have cut interest rates to boost investor confidence and prevent a wider crisis. The figures come as US and UK central banks have been cutting interest rates to bolster weakening economic growth.
But some analysts say further rate cuts will be difficult as inflation rises. Experts said the surge in inflation may now see the banks delay further cuts.
Earlier, eurozone inflation saw its biggest rise in more than six years during November, also prompted by higher oil prices, which have reached record levels recently. "The fear is that inflation will become the bigger concern," said John Forelli of Independence Investment in Boston. "It would be a lot easier to carry out their plans if inflation was not a concern."
'Dilemma''Dilemma'
The rise in inflation comes at a time when economic growth in the world's largest economy is slowing due to the housing slowdown and credit crisis. Earlier on Friday, a report showed that inflation in the eurozone, which covers the 13 nations that use the single European currency, also surged.
There are fears that as energy costs increase, consumers will have less money to spend, which could further hamper economic growth. According to figures from Eurostat, consumer prices rose 3.1% in November compared with the same month in 2006, the biggest rise in more than six years and up from October's 2.6%.
Central banks are battling to keep inflation in check as a slump in the price of the US dollar, and higher energy costs have pushed up prices.
However, at the same time they are also trying to limit the impact of a global credit crunch caused by problems in the US mortgage market.
There are fears that the high energy costs and problems in the financial markets will act as a brake on consumer spending, and hamper economic growth.
Analysts said that central banks including the US Federal Reserve will have a number of factors to consider when setting borrowing costs in coming months.
"The data highlights the huge dilemma the Fed is under between trying to quell the financial dislocations in the market, easing policy, all the while inflation rates are starting to climb higher," said Kim Rupert at Action Economics.
"It's going to be a difficult road."
Background figures
The last time US inflation rose by such a large amount on a monthly basis came after an energy shortage in the wake of hurricane Katrina in September 2005.The last time US inflation rose by such a large amount on a monthly basis came after an energy shortage in the wake of hurricane Katrina in September 2005.
As well as energy, the cost of clothing, airline tickets and medication also rose in November in the US.As well as energy, the cost of clothing, airline tickets and medication also rose in November in the US.
Consumer prices increased 4.3% on a yearly basis - the most dramatic rise since June 2006.Consumer prices increased 4.3% on a yearly basis - the most dramatic rise since June 2006.
While the US central bank has cut interest rates three times in recent months to boost the economy, analysts suggest that these figures will make another interest rate cut less likely.While the US central bank has cut interest rates three times in recent months to boost the economy, analysts suggest that these figures will make another interest rate cut less likely.
Kim Rupert at Action Economics said: "The data highlights the huge dilemma the Fed is under between trying to quell the financial dislocations in the market, easing policy, all the while inflation rates are starting to climb higher." For the year to date, inflation is at 4.2% - compared with 2.6% in the same month in 2006.
"It's going to be a difficult road for the Fed." Separate figures from the Fed on Friday showed further evidence that the economy may not be slowing as quickly as first thought, analysts said.
For the year to date, inflation is at 4.2% on an annual rate - far above the 2.6% seen in 2006. Industrial production rose 0.3% in November, reversing October's 0.7% drop, the Fed said. This reversal stemmed from higher output at auto factories, contributing to the overall 0.4% rise in manufacturing output.
Meanwhile separate figures from the US Federal Reserve showed industrial production rose 0.3% in November, reversing October's 0.7% drop.
This reversal stemmed from higher output at auto factories, contributing to the overall 0.4% rise in manufacturing output.
Output from the mining industry, which includes oil production, rose 1.1% for the month.