US inflation data 'benign'

Lower energy and gasoline (petrol) prices helped keep October inflation down

US consumer prices rose 0.2% in October in line with analyst expectations.

Analysts said the data was "benign" and likely to ease inflation concerns at the Federal Reserve, the US central bank.

"There is no reason to believe from these numbers that there will be any pressure on the Fed to raise short-term interest rates," First Albany chief investment officer Hugh Johnson said.

Bond, equity and foreign exchange markets were little changed on the news.

The Labour Department's consumer price index had risen by an unexpectedly strong 0.5% in September, mainly due to a 3.8% increase in energy prices. October energy prices grew by just 0.2%.

Biggest threat

So-called "core" inflation - which excludes the effects of the more volatile food and energy sectors - was also up 0.2% last month, compared with a 0.3% increase in September.

Compared with a year ago, consumer prices were up 3.4% and core inflation was 2.5% higher, the Labour Department said.

The October data came one day after the Fed decided to keep interest rates on hold at 6.5%.

It had said a possible rise in the inflation rate was still the biggest threat to the economy, despite signs of slowing growth.

Those words put a dampener on Wall Street and reduced gains on the New York Stock Exchange on Wednesday.

Investors had hoped that the Fed might offer some indication that interest rates had peaked for the moment.

The Federal Open Market Committee next meets on 19 December for monetary policy discussions.

Following the latest data, analysts now widely expect it to drop its warning about inflation risks.

Unanimous

Minutes of the FOMC's 3 October meeting released later on Thursday revealed that committee members had voted 10-0 to keep interest rates unchanged that time.

They also noted "appreciable slowing in the pace of the [economic] expansion from the outsized increases in the latter part of 1999 and the first half of this year".

Some FOMC members said they thought inflation risks were lessening but there was unanimous agreement on retaining a policy bias towards raising rates and staying "especially vigilant" to signs of prices increasing.

If inflation did increase, the pick up was likely to be "modest and gradual", the FOMC felt.