U.S. consumer prices in November rose to 1.8% from a year ago as expected up from -0.2% the month prior. A 4.1% rise in energy costs led to the annualized gains and pushed prices higher by 0.4% during the month. However, declines in apparel and personal computers as retailers slashed prices heading into the Holiday shopping season led to a flat monthly core reading and the annualized rate holding at 1.7%. The lack of a threat of inflation will most likely keep the Fed on hold at today’s rate decision and for the foreseeable future. Indeed, yesterday Chairman Ben Bernanke wrote in a response to questions from Senator Jim Bunning “I continue to expect slack resources, together with the stability of inflation expectations, to contribute to the maintenance of low inflation in the period ahead.” Meanwhile, U.S. housing starts rose 8.9% to an annual rate of 574,000 reversing last month’s decline as the extension of the government tax credit. Also, building permits jumped to a year high of 584,000 signaling that new construction is expected to continuing rising and the housing recovery to be sustainable. Currency markets saw little reaction to the fundamental releases as investors await the central bank rate decision.
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