WASHINGTON, Reuters) - U.S. consumer prices rebounded more than expected in October and underlying inflation picked up, which together with abating trade tensions and fears of a recession, support the Federal Reserve's signal for no further interest rate cuts in the near term.
The Labor Department said on Wednesday its consumer price index increased 0.4per cent last month as households paid more for energy products, healthcare, food and a range of other goods. That was the largest gain in the CPI since March and followed an unchanged reading in September.
In the 12 months through October, the CPI increased 1.8per cent after climbing 1.7per cent in September.
Economists polled by Reuters had forecast the CPI advancing 0.3per cent in October and gaining 1.7per cent on a year-on-year basis.
Excluding the volatile food and energy components, the CPI rose 0.2per cent after edging up 0.1per cent in September. The so-called core CPI rose as healthcare costs jumped by the most in more than three years. There were also increases in prices of used cars and trucks and recreation and rents.
In the 12 months through October, the core CPI increased 2.3per cent after rising 2.4per cent in September.
The Fed tracks the core personal consumption expenditures (PCE) price index for its 2.0per cent inflation target. The core PCE price index rose 1.7per cent on a year-on-year basis in September and has fallen short of its target this year.
October's firmer monthly CPI reading and jump in healthcare costs suggest a pick-up in the core PCE price index last month. The core PCE price data will be published later this month.
The U.S. central bank last month cut interest rates for the third time this year and signaled a pause in the easing cycle that started in July when it reduced borrowing costs for the first time since 2008.
Stable inflation comes on the heels of fairly upbeat data, including better-than-expected job growth in October and an acceleration in services sector activity.
There has also been an de-escalation of trade tensions between the United States and China. President Donald Trump on Tuesday said Washington was close to signing a "phase one" trade deal with Beijing, but provided no new details.
While the 16-month U.S.-China trade war is weighing on the manufacturing industry, the household sector remains solid.
In October, energy prices jumped 2.7per cent after falling 1.4per cent in the prior month. Energy prices accounted for more than half of the increase in the CPI last month.
Gasoline prices rebounded 3.7per cent after declining 2.4per cent in September. Food prices rose 0.2per cent, rising for a second straight month. Food consumed at home gained 0.3per cent.
Owners' equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, increased 0.2per cent in October after rising 0.3per cent in September. But other shelter categories softened last month. The rent index rose 0.1per cent, the smallest gain since April 2011.
Healthcare costs surged 1.0per cent last month, the most since August 2016, after climbing 0.2per cent in September. Apparel prices fell 1.8per cent after dropping 0.4per cent in the prior month.
Used motor vehicles and trucks prices increased 1.3per cent after decreasing 1.6per cent in September.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci) ((Lucia.Mutikani@thomsonreuters.com)