The Labor Department this morning (Dec. 14) reported a 0.8% jump in the Consumer Price Index in November, the biggest increase in more than two years. The increase was fueled largely by a 5.7% hike in the cost of energy, which the Labor Department said accounted for nearly 70% of the overall increase in the Consumer Price Index.

Minus energy and food prices, which comprise the so-called core CPI, prices were up a more modest 0.3% but were 2.2% from October. The increases were above what economists and Wall Street were expecting and outside the range of Federal Reserve targets. Prices are up 4.3% from November, 2006, which is the highest rate since September 2005.

The unexpected increase will likely make it more difficult for the Fed to cut interest rates further at its next meeting in late January, although by then there will have been another month of data. In its most recent statement, issued on Tuesday as it announced 25-basis-point cuts to its Federal Funds and Discount rates, the Fed Open Market Committee said, "Readings on core inflation have improved modestly this year, but elevated energy and commodity prices, among other factors, may put upward pressure on inflation. In this context, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully."

The CPI for individual categories moved up 0.3% for food; 0.8% for apparel; 2.9% for transportation; food prices were up 0.3%; 0.4% for housing; and 0.4% for medical care.