North American stocks closed higher and the US Dollar fell lower on Friday as U.S. consumer prices rose solidly in November, posting their largest annual gain since June 1982.
According to economic data released from the US Labor Department said on Friday, the consumer price index in the world’s largest economy increased 0.8% in November. Last month’s increase follows a 0.9% surge in October as the cost of goods and services increased across the board amid continuing supply constraints.
In the 12 months through November, the CPI increased 6.8% – the biggest year-on-year rise since June 1982 and an uptick from the 6.2% advance recorded in October.
The rise in prices comes despite falls in gas and oil. Food prices increased 0.7%. driven by a jump in the price of fruits and vegetables, meat, and cereals, and bakery products. The price of food consumed at home gained 6.4% over the past 12 months, the most since December 2008.
Fed to Accelerate Tapering?
The sharp increase in CPI has fueled speculation that it could encourage the Federal Reserve to quickly wind down its bond purchases.
Michael Arone, the chief investment strategist at State Street Global Advisors said of Friday’s CPI data:
“Today’s CPI report confirmed what most Americans already know, and that is prices across a number of the components have been increasing and increasing by the largest amounts we’ve seen in decades. There’s not a big surprise here, most of this data was expected.
“The Fed is set to accelerate the tapering, and that means they’ll end in March and they’re likely to begin to raise rates at that point. Again, most of that is priced into the market already, and the Fed is behind the curve and they need to catch up. They’ll start to do that at next week’s meeting.
“The market’s positive reaction is interesting in that this data suggests that the Fed will have to tighten monetary policy more aggressively than just a couple of month ago, and the market’s acceptance of that is a little surprising to me.”
Michael Arone
