US consumer price gains in Feb
Budget deficit jumps to $215.2 bln
WASHINGTON, March 13, (RTRS): US consumer prices increased marginally in February amid a decline in gasoline prices and a moderation in the cost of rental accommodation, the latest indication that an anticipated pickup in inflation likely will be only gradual.
Strong inflation numbers in January had sparked fears that price pressures were accelerating, leading financial markets to expect a more aggressive pace of interest rate increases from the Federal Reserve than is currently anticipated.
“These figures should satisfy Fed policymakers that inflation is not too cold, as last spring’s numbers hinted at, or too hot, as might have been inferred from the January print,” said Michael Feroli, an economist at JPMorgan in New York.
The Labor Department said on Tuesday its Consumer Price Index rose 0.2 percent last month after jumping 0.5 percent in January. In the 12 months through February, the CPI rose 2.2 percent, up from 2.1 percent in January as the flat reading from last year dropped from the calculation.
Excluding the volatile food and energy components, the CPI gained 0.2 percent after accelerating 0.3 percent in January. The year-on-year increase in the so-called core CPI was unchanged at 1.8 percent in February.
Last month’s increase in consumer prices was in line with economists’ expectations. The Fed tracks a different index, the personal consumption expenditures price index excluding food and energy, which has consistently undershot the central bank’s 2 percent target since mid-2012.
The dollar slipped against a basket of currencies on the inflation data. The greenback was also hurt by President Donald Trump’s firing of Secretary of State Rex Tillerson after a series of public rifts over policy on North Korea, Russia and Iran. US Treasury prices rose while stocks on Wall Street fell.
The CPI report came on the heels of data last Friday showing a deceleration in wage growth in February as well as a downward revision to January’s increase in average hourly earnings. Average hourly earnings rose 2.6 percent on an annual basis in February, stepping down from January’s 2.8 percent increase.
Strong
Against the backdrop of a tightening labor market and strong economy, the Fed is widely expected to increase interest rates at its March 20-21 meeting.
Given the steady price gains and moderate wage inflation some economists did not believe the Fed would upgrade its 2018 interest rate forecast at next week’s policy meeting
The central bank has forecast three rate hikes this year. Many economists expect that at some point it will raise its projection to four rate increases this year amid optimism that the robust labor market will start boosting wage growth at least by the second half of the year. Policymakers consider the labor market to be near or a little beyond full employment.
The jobless rate is at a 17-year low of 4.1 percent and economists expect it to drop to 3.5 percent by year-end. A weakening dollar and fiscal stimulus in the form of a $1.5 trillion tax cut package and increased government spending are also seen spurring inflation.
A survey of small businesses published on Tuesday showed the share of owners reporting higher selling prices in February hit its highest level since July 2014. The NFIB survey also showed nearly a third of owners reported raising compensation to retain or attract workers last month, the largest share in more than 17 years.
The federal government recorded a budget deficit of $215.2 billion in February, up significantly from a year ago as the impact of the GOP tax cuts passed in December begin to surface.
The Treasury Department said Monday that the February deficit was 12.1 percent higher than a year ago, reflecting in part a drop of $5 billion in individual withholding taxes paid last month compared to a year ago. In February, employers started using tax tables that withheld less from paychecks based on the new law.
For the first five months of this budget year, the deficit totals $391 billion, an increase of 11.5 percent from the same period a year ago. President Donald Trump’s new budget projects this year’s deficit will hit $873 billion, up a sharp 31.3 percent from last year’s imbalance of $665.8 billion.
Over the next decade, Trump’s budget projects deficits will total $7.1 trillion. That is more than double the $3.2 trillion in deficits over the coming decade that Trump had envisioned in the budget he sent Congress last year. The deficit picture has darkened in part because of the $1.5 trillion in tax cuts Trump pushed through Congress in December.