WASHINGTON(Reuters) - US consumer prices increased in October after two straight months of declines as the cost of gasoline and a range of other goods rose, a tentative sign that the drag on inflation from a strong dollar and lower oil prices was starting to ease.
The modest rise in inflation last month could offer more support to expectations that the Federal Reserve will raise interest rates next month. The Labor Department said on Tuesday its Consumer Price Index increased 0.2 per cent last month, reversing September's 0.2 per cent drop.
In the 12 months through October, the CPI advanced 0.2 per cent after being unchanged in September. Economists polled by Reuters had forecast the CPI rising 0.2 per cent in October and edging up 0.1 per cent from a year ago.
Signs of stabilisation in prices after a recent downward spiral is likely to be welcomed by Fed officials and give them some confidence that inflation will gradually move toward the central bank's 2 per cent target. Inflation has persistently run below target.
In the wake of a robust October employment report, the US central bank is expected to raise its benchmark overnight interest rate from near zero at its Dec 15-16 meeting.
There is hope tightening labour market conditions, characterised by a jobless rate now in a range that some Fed officials view as consistent with full employment will put upward pressure on wages and drive inflation toward its target.
The so-called core CPI, which strips out food and energy costs, gained 0.2 per cent after a similar rise the prior month. Rents and medical costs accounted for much of the increase in the core CPI last month.
In the 12 months through October, the core CPI increased 1.9 per cent after rising by the same margin in September.
The Fed tracks the personal consumption expenditures price index, excluding food and energy, which is running below the core CPI. The US dollar's 18 per cent rise against the currencies of the United States' main trading partners since June 2014 has weighed on prices of goods such as apparel and automobiles.
Last month, gasoline prices rose 0.4 per cent after falling 9 per cent in September. There were also increases in the cost of electricity.
Food prices edged up 0.1 per cent, the smallest gain since May, after rising 0.4 per cent the prior month. Four of the six major grocery store food group indexes rose last month, with cereals and bakery products posting the largest increase since August 2011.
The rental index increased 0.3 per cent after rising 0.4 per cent in September. Medical care costs rose 0.7 per cent, the largest increase since April. Hospital costs increased 2 per cent. Airline fares rose 1.5 per cent, ending a string of three consecutive declines.
There were also increases in recreation costs, but apparel prices recorded their biggest decline since December.