PRICES EDGE UP IN MARCH

Higher gaso­line costs fuel an in­crease in in­fla­tion for sec­ond straight month.

Los Angeles Times - - BUSINESS - By Jim Puz­zanghera jim.puz­zanghera @la­times.com

WASH­ING­TON — In­fla­tion edged up in March for the sec­ond straight month as gas prices con­tin­ued to re­bound af­ter their steep drop.

The con­sumer price in­dex in­creased 0.2%, the same as in Fe­bru­ary, the La­bor Depart­ment said Fri­day. Fe­bru­ary’s in­crease was the first in four months as a sharp drop in crude oil prices pushed down en­ergy costs across the board.

Last month’s in­crease was in line with an­a­lysts’ fore­casts and an in­di­ca­tion that in­fla­tion is sta­bi­liz­ing.

Gaso­line prices in­creased 3.9% in March, and en­ergy prices more broadly were up 1.1%. That off­set a 0.5% decline in gro­cery prices, the big­gest drop since April 2009.

An­nual in­fla­tion re­mained ex­tremely low, with prices down 0.1% for the 12 months ended March 30.

Dur­ing that pe­riod, en­ergy prices were down 18.3%, more than off­set­ting a 2.3% in­crease in food prices.

But food and en­ergy prices are very volatile. So­called core in­fla­tion, which ex­cludes those, was up 1.8% for the year af­ter a 0.2% in­crease in March.

Fed­eral Re­serve of­fi­cials want to see all prices ris­ing about 2% a year, and con­cerns over low in­fla­tion are weigh­ing on cen­tral bank pol­i­cy­mak­ers as they con­sider when to start rais­ing their bench­mark short-term in­ter­est rate.

The Fed uses a dif­fer­ent in­fla­tion barom­e­ter based on per­sonal con­sump­tion ex­pen­di­tures, but that fig­ure also is low — up just 0.3% for the year ended Feb. 28, the most re­cent data avail­able.

Fed of­fi­cials have in­di­cated that they could start rais­ing the in­ter­est rate from near zero per­cent as early as June. But low in­fla­tion and other weak eco­nomic data re­cently have led to spec­u­la­tion that the Fed could wait longer.

Narayana Kocher­lakota, pres­i­dent of the Fed­eral Re­serve Bank of Min­neapo­lis, said this week that he ex­pected in­fla­tion to re­main be­low the cen­tral bank’s an­nual tar­get for sev­eral years. For that rea­son, he said, it would be a mis­take to start rais­ing the short-term in­ter­est rate this year.

But Stu­art Hoffman, chief econ­o­mist at PNC Fi­nan­cial Group, said Fri­day’s data showed that in­fla­tion was sta­bi­liz­ing and should give Fed of­fi­cials con­fi­dence to start rais­ing the rate later this year.

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