US consumer prices soft; underlying inflation rising

22 May 2015 | Author: | No comments yet »

Core U.S. Consumer Prices Rose in April by Most in Two Years.

The US Consumer Price Index gained 0.1 percent last month after increasing 0.2 percent in March, according to the Labor Department. WASHINGTON (AP) — U.S. consumer prices were up slightly in April for the third straight month, suggesting that an improving economy could be setting the stage for the Federal Reserve to raise interest rates later this year.

WASHINGTON (MarketWatch) — So-called core consumer prices that strip out volatile energy and food inflation rose by the largest percentage in over two years in April.The cost of living excluding food and fuel rose at a faster pace than expected in April, indicating inflation is inching toward the Federal Reserve’s goal. The core consumer-price index climbed 0.3 percent, the biggest gain since January 2013, reflecting broad-based increases, a Labor Department report showed today in Washington. Jennifer Lee, senior economist at BMO Capital Markets, said that both overall inflation and core prices have accelerated modestly over the past six months. “This suggests that although inflation remains very tame, economic growth, sporadic as it is, … is helping prices stabilize instead of fall,” Lee said in a note to clients.

The upward thrust in core inflation will likely be welcomed by officials at the U.S. central bank as they consider their monetary policy options, against the backdrop of what appears to be sluggish economic growth in the first half of the year. Minutes of the Fed’s April meeting released on Wednesday said “many” policymakers did not believe that by June, data “would provide sufficient confirmation that the conditions” for raising the key short-term interest rate had been meet.

A recent batch of weak data, including April industrial production and retail sales, has left many economists even doubting that the Fed will raise rates in September. The increase in prices at the core level could lead some more Federal Reserve officials to press for a rate hike when the central bank meets in mid-June.

In addition to the jump in medical costs, the price of used cars rose 0.6 percent although the price of a new car increased a more modest 0.1 percent. The advance in the core index last month was bolstered by prices for rents, used cars and trucks, and medical care, which showed the biggest increase since January 2007. Inflation will need to keep rising in order for Fed officials to be “reasonably confident” that progress on their price stability mandate is sufficient to allow for an increase in the benchmark interest rate.

The officials’ preferred measure of price growth, the personal consumption expenditures gauge, rose 0.3 percent in the year ended March and hasn’t met the Fed’s goal since April 2012. The Fed has kept interest rates at near zero in an effort to stimulate stronger economic growth and re-establish the millions of jobs lost during the 2007-2009 recession. The Fed officials will announce the start of interest-rate increases at their September meeting, according to 42 of 54 economists surveyed by Bloomberg May 8-13.

The Labor Department’s gauge of wholesale prices, which includes 75 percent of all U.S. goods and services, unexpectedly fell 0.4 percent in April from the prior month, depressed by declining profit margins at wholesalers and retailers, data showed last week.

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