CPI: Rate Of Inflation Remains Uncomfortably Low

Consumer prices went up slightly during the previous year thanks to rising energy and food prices, but are still not as high as policymakers want them to be.

The Consumer Price Index (CPI), a key gauge of inflation, went up 1.1 percent during the last one year ending on the 30th September, according to the Bureau of Labor Statistics, unchanged from last month. Any number greater than zero implies that prices are increasing, but a rate of around 1 percent is considered sluggish growth.

Shortly before this report was published, Chairman of Federal Reserve Ben Bernanke delivered a speech entitled "low inflation environment", predicting that inflation trend will "remain subdued for some time".

Bernanke warned that the rate of inflation is too low, while adding, "The risk of deflation is higher than desirable".

There were also fears of the likelihood of high inflation amid predictions that US monetary policy will be relaxed further. However, the low CPI figure helped mitigate some of those concerns, vindicating the predictions that Fed will purchase more long term Treasuries this November, according to senior economist Mark Vitner at Wells Fargo.

"There really isn't a whole lot of reason to worry about inflation right now, and that gives the Fed a free hand to do whatever they need to do," Vitner stated

Policymakers were closely monitoring the CPI data this month as the US government used it to decide that Social Security beneficiaries won't get an automatic cost of living adjustment in 2011.