Rising rents, healthcare costs boost underlying US inflation
The core CPI increased to 1.8 per cent in the 12 months through December, picking up from 1.7 per cent in November.
WASHINGTON: Underlying US consumer prices recorded their largest increase in 11 months in December on strong gains in the cost of rental accommodation and healthcare, bolstering expectations that inflation will accelerate this year.
The strengthening domestic demand was also underscored by other data on Friday showing retail sales rising at a solid clip in December. The reports probably will keep the Federal Reserve on course to increase interest rates in March.
They raised the prospects of a more aggressive monetary policy tightening this year, especially against the backdrop of a $1.5 trillion package of tax cuts passed by the Republican-controlled US Congress and signed into law by President Donald Trump last month.
The US central bank is forecasting three rate increases this year. It raised borrowing costs three times in 2017.
“The economy is doing quite well right now ... and well enough for the Fed to feel compelled to take steps to take the edge off before inflation truly becomes problematic,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Michigan.
The Labor Department said its Consumer Price Index, excluding the volatile food and energy components, rose 0.3 per cent last month as prices for new and used cars and trucks and motor vehicle insurance increased.
That was the biggest advance in the so-called core CPI since January 2017 and followed a 0.1 per cent gain in November. The core CPI increased 1.8 per cent in the 12 months through December, picking up from 1.7 per cent in November.
Economists polled by Reuters had forecast core CPI rising 0.2 per cent month-on-month and holding steady at 1.7 per cent on an annual basis. Weak import and producer price data this week had raised concerns about the inflation outlook, although the two reports do not have a strong correlation with the CPI.