MercoPress. South Atlantic News Agency

US recorded highest inflation in 25 years

United States consumer prices ballooned last September to its highest in 25 years, 1,2%, as a direct consequence of fuel prices and the hurricanes Katrina and Rita, reported the US Labour Department.

The 12% increase in fuel prices was responsible for 90% of the September jump which was quiet evident when gasoline at the pump shot above 3 US dollars the gallon, following the shutting down of refineries and oil extraction in the Gulf of Mexico because of the hurricanes.

The 12% rise is the biggest jump in 48 years, with petrol up almost 18%. Leaving aside volatile prices of fuel and food, the basic inflation was 0,1%, and is the sixth month running with low percentages. With September's hike, inflation in the last twelve months reached 4,7%.

President George W Bush's spokesman said he was confident that the Federal Reserve could handle inflation fears.

In another indication of the lingering devastation wrought by the storms, output at US factories, mines and utilities fell by 1.3% in September - the worst one-month drop in more than 23 years. Retail sales excluding car sales rose 1.1% in the month, partly as a result of the petrol price hike.

However concerns have now moved to the Federal Reserve and how will it interpret and react to the latest consumer inflation figures in the coming Open Market meeting after eleven running months of gradual increase in the basic interest rate, since June 2004.

"Today's news reinforces the view that the US consumer is holding out well, with US businesses and producers bearing the brunt of rising costs," said the Centre for Economics and Business Research in London. "The Federal Reserve is likely to be worried by this and will want to stem the rise in prices; it still has the capacity to raise rates without damaging growth."