United States' November CPI heats up to highest year-on-year rate since 1982

• The consumer price index rise 0.8% last month after surging 0.9% in October.
• S&P e-mini futures extends gains and were last up 0.75%, pointing to a strong open on Wall Street.
• Analyst say the inflation trends continue, but the trends are a little bit "worrisome right now.”

NEW YORK: US consumer prices increased further in November as the cost of goods and services rose broadly amid supply constraints, leading to the largest annual gain since June 1982, which could encourage the Federal Reserve to quickly wind down its bond purchases.

The consumer price index rose 0.8% last month after surging 0.9% in October, the Labor Department said on Friday. In the 12 months through November, the CPI accelerated 6.8%, as expected by economists polled by Reuters, following a 6.2% advance in October. 

Market reaction

S&P e-mini futures extended gains and were last up 0.75%, pointing to a strong open on Wall Street.

Wall Street's main indexes opened stronger after data showed consumer prices rose largely in line with estimates last month, taking some pressure off investors concerned about aggressive tightening of monetary policy.

The Dow Jones Industrial Average rose 75.86 points, or 0.21%, at the open to 35,830.55.

While the Nasdaq Composite gained 112.22 points, or 0.72%, to 15,629.59 at the opening bell.

Analyst comments

Ameriprise Financial Services Inc Chief Economist Russell Price said: “This report solidifies the view of what the Fed’s path will be. This further alleviates any doubt as to an acceleration of their tapering to come out of next week’s meeting. What will be key to watch from the Fed is their dot plot to see committee members’ views of when the path of hikes will come over the next two years.

“Today’s report probably doesn’t change what the market’s perspectives on when rate hikes begin, which consensus shows is some time in the second quarter.

“The inflation trends continue, but the trends are a little bit worrisome right now.”

Meanwhile, State Street Global Advisors Chief Investment Strategist Michael Arone stated: “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.”