Dhaka, Bangladesh
US consumer prices see modest rise in July

US consumer prices see modest rise in July

WASHINGTON, Aug 12: US consumer inflation rose modestly in July, showing signs of life after months of weakening price pressures, the Labor Department said Friday, reports AFP. While inflation remains tame, the slight increase could help ease concerns among Federal Reserve policymakers who had been left befuddled by the absence of inflation in the first half of the year despite steady job creation and falling unemployment. After raising benchmark interest rates twice so far in 2017, the Fed had been expected to increase once more before the end of the year. But some economists had written this off in light of flagging inflation. Rising costs for housing, medical care and food helped push the Consumer Price Index (CPI) up 0.1 percent in July, seasonally adjusted, after no change in June and a 0.1 decrease in May. That however was still half of the increase expected by economists for the indicator, which tracks costs of household goods and services and is a closely watched measure of inflation. The 12-month CPI measure also gained a tenth of a point in July growing to 1.7 percent. It was the first rise in five months after steady declines, but still well below the Fed’s two percent target. And unlike previous months, July’s gains were not entirely driven by the volatile food and fuel categories, since the increase was the same even when those categories were excluded, for both the monthly and the 12-month core measures. Core CPI has risen by 0.1 percent for four consecutive months, consistently undershooting expectations. Analysts had expected July to see a 0.2 percent gain. Still, prices for meat had their largest one-month gain in nearly three years, adding one percent. The cost of frankfurters rose 10.5 percent, the largest monthly increase since March 2002. Weak price pressures this year mean inflation has been well behind where it was over the same period in 2016. Year to date, the CPI is up 0.9 percent, down sharply from the 1.5 percent recorded in the first seven months of 2016. Despite the gain, futures markets reacted to the July inflation numbers by downgrading the chances of a December rate hike, with the balance of betting money putting the probability of another interest rate increase by that month at 42 percent, down from about 47 percent on Wednesday. Ian Shepherdson of Pantheon Macroeconomics said the July numbers had been soft but pointed to an August rebound, with hotel costs likely to recover from July’s record 4.2 percent drop, driving the index higher. “This report will embolden Fed and market doves further but it’s a long time until December and by then we expect the core trend to be firmly re-established at 0.2 percent,” he said in a research note.

Share |