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By Eoin Callan and Krishna Guha in Washington, Tony Tassell in London and Ralph Atkins in Frankfurt The core consumer price index rose 0.1 per cent in October, its lowest monthly increase since inflation began to accelerate in the spring. The October report is a clear break with a run of stubbornly high inflation figures. Core inflation rose 0.2 per cent in each of the three preceding months, and faster in the previous quarter. The three-month annualised rate of core inflation often cited by Ben Bernanke, the Fed chairman – which peaked at 3.8 per cent in May – fell for the fifth consecutive month to 2.3 per cent from 2.7 per cent. “I view this as the first sign, the first proof, that the outlook for inflation is improving,” said Bob DiClemente, chief US economist at Citigroup. However, Michael Moskow, president of the Chicago Fed, warned investors against assuming that the Fed would think the fight against inflation is now over. “It's one month, and I think it's a bit premature for anyone to say that we have broken the back of inflation,” he said. “It is moving in the right direction; the key is whether that can be sustained and how quickly we can move to rates that are in a range that is commensurate with price stability. We're certainly not there now.” He added: “My current assessment is that the risk of inflation remaining too high is greater than the risk of growth being too low.” Lower energy prices have given central banks around the world greater flexibility in tackling inflation. The Bank of Japan also kept its options open yesterday, keeping interest rates at 0.25 per cent, after a low headline inflation rate of 0.2 per cent in September.
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