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WASHINGTON - UNITED States consumer prices rose the most in more than two years in November as energy costs surged and a host of other prices marched higher, damping prospects of further interest-rate cuts from the Federal Reserve.
At the same time, production at the nation's mines, factories and utilities rose a stronger-than-expected 0.3 per cent last month, suggesting the economy may have a bit more steam than many analysts had thought.
The Labor Department said on Friday that the consumer price index jumped 0.8 per cent in November, the biggest gain since September 2005, as energy costs leaped 5.7 per cent.
Even stripping out fast-rising food and energy prices, the so-called core CPI rose a relatively steep 0.3 per cent, the largest increase since January and ahead of the 0.2 per cent rise expected on Wall Street.
'It puts the Fed in a little bit of a bind and people have to question how aggressive the Fed can be in cutting rates if inflation is rearing its ugly head,' said Mr Firas Askari, head currency trader at BMO Capital Markets in Toronto.
US stocks and government bond prices fell while the dollar rose against major currencies as traders saw the data suggesting slimmer chances of further rate cuts from the Fed, which has lowered borrowing costs by a percentage point over the past three months. The Dow Jones industrial average closed down 178 points, or 1.3 per cent.
'All of these dovish, weak-money individuals out there screaming for rate cuts really need a bucket of cold water in the face because if the Fed goes down that path we may have a bubble in the CPI,' said Mr Michael Darda, chief economist at MKM Partners in Greenwich, Connecticut. -- REUTERS
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