US consumer prices post first decline in seven months

16 Sep 2015 | Author: | No comments yet »

Consumer Prices in U.S. Drop in August on Plunging Energy.

The consumer-price index fell 0.1 percent, the first decrease since January, after a 0.1 percent gain in July, Labor Department figures showed Wednesday. WASHINGTON—Consumer prices fell in August due largely to depressed oil markets, marking the first drop since January and complicating the Federal Reserve’s debate over when to raise interest rates. Central bankers, who conclude a two-day meeting on Thursday, will have to weigh restrained prices, uneasy financial markets and a resilient U.S. labor market as they consider raising interest rates. “Inflation is still relatively muted,” said Gregory Daco, head of U.S. macroeconomics at Oxford Economics USA in New York, who correctly projected the drop in the CPI. “We continue to see pass-through from a strong dollar and low energy costs.” The decline in the cost of living allowed Americans’ paychecks to stretch further. The core CPI measure, which excludes volatile food and fuel costs, rose 1.8 percent from August 2014, matching the prior month’s year-over-year gain. The nationwide average cost of a gallon of regular gasoline was $2.31 as of Tuesday, down from this year’s peak of $2.80 reached in the middle of June, according to AAA, the biggest U.S. motoring group.

Officials are looking to raise the benchmark interest rate for the first time in nearly a decade after a stretch of robust job growth that has pushed down unemployment to 5.1%. These readings often vary from results for this category within the Fed’s preferred measure of inflation — the core PCE deflator that’s tied to consumption.

The Fed prefers another inflation measure—the Commerce Department’s price index for personal consumption expenditures—to determine whether prices are growing at the central bank’s target. Futures contracts show the odds of an increase this month have dropped to 32 percent from 48 percent a month ago, according to data compiled by Bloomberg.

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