Fuel costs boost US consumer prices

US consumer prices recorded their biggest increase in eight months in September as fuel prices soared in the wake of hurricane-related production disruptions at oil refineries in the Gulf Coast area, but underlying inflation remained muted.

The mixed report from the Labour Department yesterday comes as Federal Reserve officials have been engaged in a vigorous debate on the inflation path and suggests a December interest rate increase is not a done deal.

As a result, the dollar fell against a basket of currencies, while prices for US Treasuries rose. US stock index futures rose. Policymakers could, however, find solace from another report indicating that the economy was swiftly recovering from the damage inflicted by Hurricanes Harvey and Irma, with a strong rebound in retail sales last month.

“The firmness in retail sales should override the enduring mystery of low inflation to spur a December Fed rate hike,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto.

The Labour Department said its Consumer Price Index increased 0.5 per cent last month after advancing 0.4 per cent in August.

September’s rise was the biggest since January and pushed up the year-on-year gain in the CPI to 2.2 per cent from 1.9 per cent in August. The increase in the CPI was broadly in line with economists’ expectations.

Petrol prices surged 13.1 per cent last month, accounting for 75 per cent of the rise in the CPI. The increase in fuel prices was the largest since June 2009 and followed a 6.3 per cent advance in August.