In­fla­tion trails es­ti­mates, still near Fed’s goal

The Atlanta Journal-Constitution - - BUSINESS - By Jeff Kearns Bloomberg News

A gauge of un­der­ly­ing U.S. in­fla­tion was be­low es­ti­mates in Septem­ber as used-car costs fell and hous­ing rents cooled, sig­nal­ing that price gains may re­main close to where Fed­eral Re­serve pol­i­cy­mak­ers want them amid an out­look for con­tin­ued grad­ual in­ter­est-rate hikes.

Ex­clud­ing volatile food and en­ergy costs, the core con­sumer price in­dex rose 2.2 per­cent in Septem­ber from a year ear­lier, the same pace as in Au­gust and less than the 2.3 per­cent me­dian es­ti­mate of econ­o­mists sur­veyed by Bloomberg News, a La­bor De­part­ment re­port showed Thurs­day.

The broader CPI slowed to a 2.3 per­cent an­nual gain, the least since Fe­bru­ary, com­pared with fore­casts for 2.4 per­cent.

The in­fla­tion fig­ures partly re­flect a 3 per­cent monthly de­cline in prices for used cars and trucks, the big­gest drop in 15 years.

While the dol­lar and 10-year Trea­sury yields ini­tially fell af­ter the re­port, Fed of­fi­cials will have two more months of price fig­ures in hand be­fore their De­cem­ber meet­ing at which they’re pro­jected to raise in­ter­est rates for a fourth time this year amid solid eco­nomic growth and con­sumer spend­ing, boosted by tax cuts.

“The Fed would like to see in­fla­tion stay around 2 per­cent, but in re­cent months it’s been eas­ing some,” said Michael Moran, chief econ­o­mist at Daiwa Cap­i­tal Mar­kets Amer­ica in New York. How­ever, “I wouldn’t change my Fed call” for a De­cem­ber hike based on this re­port, he said, as a strong econ­omy and close-to-full em­ploy­ment mean in­fla­tion shouldn’t cool too much.

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