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US prices jump most in two years US prices jump most in two years
(about 2 hours later)
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.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 0.8% in November from October, more than many analysts forecast. Core inflation, which strips out energy and food prices, rose 0.3%.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%.
The figures come as US and UK central banks have been cutting interest rates to bolster weakening economic growth.The figures come as US and UK central banks have been cutting interest rates to bolster weakening economic growth.
Experts said the surge in inflation may now see the banks delay further cuts.Experts said the surge in inflation may now see the banks delay further cuts.
"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.""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."
US shares fell on concerns that the Federal Reserve would now not cut interest rates. That expectation helped strengthen the US dollar as investors looked for assets in currencies that offered higher returns.
'Dilemma''Dilemma'
Earlier on Friday, a report showed that inflation in the eurozone, which covers the 13 nations that use the single European currency, also surged.Earlier on Friday, a report showed that inflation in the eurozone, which covers the 13 nations that use the single European currency, also surged.
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%.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.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.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.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.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."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.""It's going to be a difficult road."
Background figuresBackground 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.
For the year to date, inflation is at 4.2% - compared with 2.6% in the same month in 2006.For the year to date, inflation is at 4.2% - compared with 2.6% in the same month in 2006.
Separate figures from the Fed on Friday showed further evidence that the economy may not be slowing as quickly as first thought, analysts said.Separate figures from the Fed on Friday showed further evidence that the economy may not be slowing as quickly as first thought, analysts said.
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.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.