US Federal Reserve's inflation index reach a 39-year high in Nov
US Federal Reserve's inflation index reach a 39-year high in Nov

WASHINGTON: In November, a key inflation indicator closely followed by the US Federal Reserve rose at its fastest rate in 39 years, putting pressure on the central bank to tighten monetary policy.

The Fed's preferred inflation indicator, the personal consumption expenditure (PCE) price index, rose 5.7 percent from a year ago in November, the quickest annual rate since July 1982, according to Commerce Department officials.

The core PCE price index, which excludes volatile food and energy prices, increased by 4.7 percent from a year ago, significantly beyond the Fed's 2% inflation objective. According to a separate report from the Labor Department, the consumer price index (CPI) increased 6.8% year over year in November, the fastest annual rate in over 40 years.

The Fed stated last week that it will speed up the end of its asset purchase programme and forecast three interest rate hikes next year.

"We're phasing out our purchases more quickly because the economy no longer requires rising levels of policy assistance with elevated price pressures and a rapidly stronger labour market," Fed Chairman Jerome Powell had stated.

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