Cheaper gaso­line weighs on US con­sumer prices in De­cem­ber as CPI de­clines 0.1% — La­bor dep’t

Business World - - World Business -

WASHINGTON — US con­sumer prices fell for the first time in nine months in De­cem­ber amid a plunge in gaso­line prices, but un­der­ly­ing in­fla­tion pres­sures re­mained firm as rental hous­ing and health care costs rose steadily.

Over­all, the re­port from the La­bor depart­ment on Fri­day painted a pic­ture of in­fla­tion that was un­der con­trol, with in­creases in some cat­e­gories off­set by de­clines else­where. This likely sup­ports re­cent state­ments by Fed­eral Re­serve of­fi­cials pledg­ing pa­tience in rais­ing in­ter­est rates this year.

“The Fed will take this as fur­ther proof that price pres­sures are build­ing more slowly than some have feared based on the strong growth of late and tight la­bor mar­ket,” said James McCann, se­nior global econ­o­mist at Aberdeen Stan­dard In­vest­ments in Bos­ton. “It cer­tainly seems to jus­tify the Fed’s mes­sage about be­ing more pa­tient on rate in­creases.”

The Con­sumer Price In­dex (CPI) dipped 0.1% last month, the first drop and weak­est read­ing since March, af­ter be­ing un­changed in Novem­ber. In the 12 months through De­cem­ber, the CPI rose 1.9%, slow­ing from Novem­ber’s 2.2% gain.

Ex­clud­ing the volatile food and en­ergy com­po­nents, the CPI in­creased 0.2%, ad­vanc­ing by the same mar­gin for a third straight month. In the 12 months through De­cem­ber, the so-called core CPI rose 2.2%, match­ing Novem­ber’s in­crease.

De­cem­ber’s in­fla­tion read­ings were in line with econ­o­mists’ ex­pec­ta­tions. The CPI rose 1.9% in 2018, slow­ing from a 2.1% in­crease in 2017. But the core CPI jumped 2.2%, up from 1.8% in 2017.

The Fed, which has a 2% in­fla­tion tar­get, tracks a dif­fer­ent mea­sure, the core per­sonal con­sump­tion ex­pen­di­tures (PCE) price in­dex, for mone­tary pol­icy.

The core PCE price in­dex in­creased 1.9% year on year in Novem­ber af­ter ris­ing 1.8% in Oc­to­ber. It hit 2% in March for the first time since April 2012.

The US cen­tral bank has fore­cast two in­ter­est rate hikes this year, but sev­eral pol­icy mak­ers, in­clud­ing Chair­man Jerome Pow­ell, have said they would be cau­tious about tight­en­ing mone­tary pol­icy.

Mr. Pow­ell re­it­er­ated that view on Thurs­day, say­ing “es­pe­cially with in­fla­tion low and un­der con­trol we have the abil­ity to be pa­tient and watch pa­tiently and care­fully” while the cen­tral bank mon­i­tored eco­nomic data and fi­nan­cial mar­kets for risks to growth.

Min­utes of the US cen­tral bank’s Dec. 18-19 pol­icy meet­ing pub­lished on Wed­nes­day showed “many” of­fi­cials were of the view that the Fed “could af­ford to be pa­tient about fur­ther pol­icy firm­ing.”

But with core in­fla­tion re­main­ing firm de­spite a strong dol­lar and slow­ing global growth, econ­o­mists say fur­ther rate in­creases this year can­not be ruled out. In ad­di­tion, a tighter la­bor mar­ket is boost­ing wage growth.

“If core in­fla­tion holds firm, the Fed will con­tinue to con­sider ad­di­tional rate hikes this year,” said Sam Bullard, a se­nior econ­o­mist at Wells Fargo Se­cu­ri­ties in Char­lotte, North Carolina.

The Fed lifted bor­row­ing costs four times in 2018. The dol­lar was lit­tle changed against other cur­ren­cies, while US Trea­sury prices rose. Stocks were trad­ing lower af­ter a five-day rally. —

Newspapers in English

Newspapers from Philippines

© PressReader. All rights reserved.