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Last Updated: Wednesday, 16 January 2008, 15:20 GMT
US inflation reaches 17-year high
A US motorist fills his vehicle
Energy prices have fuelled the surge in inflation
US inflation for all of 2007 hit the highest rate for 17 years, as surging energy and food costs pushed up prices, official data has shown.

Consumer prices rose by 4.1% for all of 2007, up sharply from a 2.5% increase in 2006, the US Labor Department said.

The figures also showed consumer prices rose by 0.3% in December, down from November's increase of 0.8%.

Energy prices jumped 17.4% in 2007, while food prices rose 4.9% - their biggest increase since 1990.

Apparel was the only category to see a fall in price over 2007, with clothing prices down 0.3%.

However, excluding volatile food and energy costs, core prices rose 0.2% in December and showed a 2.4% rise for all of 2007 - down from 2.6% in 2006.

Economists said that the inflation data was unlikely to deter the US Federal Reserve from cutting interest rates aggressively at its next meeting.

"What this means for monetary policy, it seems, is that there is some room in there for the Fed to go ahead and cut rates without fear that inflation is going to rear up," said Oscar Gonzalez, an economist at John Hancock in Boston.

The Fed is expected to lower the cost of borrowing by as much as half a percentage point to 3.75% at the end of this month, in an attempt to help spur growth.

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