NEW YORK, Dec 14, 2007 (AFP) – The dollar rose sharply Friday as a larger-than-expected spike in US inflation suggested the US Federal Reserve may not find it so easy to continue cutting interest rates.
Dealers said the latest figures showed that the Fed, like many central banks, was now caught between keeping rates high to fight inflation and the need to reduce lending costs so as to help ease a global credit crunch.
The euro dropped to 1.4429 dollars at 2200 GMT from 1.4627 dollars in New York late on Thursday.
The dollar rose strongly against the Japanese currency, hitting 113.23 yen against 112.15 Thursday.
US consumer prices jumped 0.8 percent in November, the fastest pace in more than two years, and core prices, excluding volatile food and energy costs, rose 0.3 percent.
On a 12-month basis, the overall rise was 4.3 percent, the highest since June 2006, while core inflation was 2.3 percent, the fastest since April.
The latest US price figures compound concerns that the United States and others could be at risk of “stagflation” — a combination of slower growth and stubborn inflation pressures — which puts central banks in a dilemma over whether to cut interest rates