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Slightly bigger increase in CPI in US
By Lucia Mutikani |
September 18, 2010, Saturday
|
Print Edition
Print Edition
CONSUMER prices in the United States increased slightly more than expected in August as food costs rebounded and energy costs remained elevated but core prices were flat, keeping the risk of deflation alive.
The US Labor Department yesterday said its seasonally adjusted Consumer Price Index rose 0.3 percent after rising 0.3 percent in July. That was a touch above financial markets' expectations for a 0.2 percent increase.
But excluding volatile energy and food prices, the closely watched core measure of consumer inflation was unexpectedly flat after edging up 0.1 percent in July.
Some analysts viewed the flat core reading as a sign deflation remained a threat to an economy struggling to recover from its worst recession since the 1930s.
"If core inflation comes in flat, the threat of deflation hasn't passed yet. We are still at a stage of the economy where there is growth but it's not strong enough to bring down unemployment," said Gus Faucher, director of macro-economics at Moody's Analytics in West Chester, Pennsylvania.
Most analysts expect the Federal Reserve to renew its pledge to keep monetary policy accommodative, but not to announce any new steps to ease monetary policy, when it meets next Tuesday to assess the economy.
Many, however, believe the Fed will resume large-scale asset purchases in coming months to drive long-term interest rates lower to spur the economy and keep deflation risks at bay.
The US central bank already has cut overnight interest rates to near zero and pumped more than US$1.7 trillion into the economy through purchases of Treasury and mortgage-related debt.
Data on Thursday showed prices paid at the farm and factory gate rose 0.4 percent in August.
"There is no inflation. There is no deflation. It's disinflation," said John Canally, an economist at LPL Financial in Boston.
In the 12 months to August, the CPI rose 1.1 percent after a 1.2 percent increase the prior month. The rise was in line with market expectations.
The US Labor Department yesterday said its seasonally adjusted Consumer Price Index rose 0.3 percent after rising 0.3 percent in July. That was a touch above financial markets' expectations for a 0.2 percent increase.
But excluding volatile energy and food prices, the closely watched core measure of consumer inflation was unexpectedly flat after edging up 0.1 percent in July.
Some analysts viewed the flat core reading as a sign deflation remained a threat to an economy struggling to recover from its worst recession since the 1930s.
"If core inflation comes in flat, the threat of deflation hasn't passed yet. We are still at a stage of the economy where there is growth but it's not strong enough to bring down unemployment," said Gus Faucher, director of macro-economics at Moody's Analytics in West Chester, Pennsylvania.
Most analysts expect the Federal Reserve to renew its pledge to keep monetary policy accommodative, but not to announce any new steps to ease monetary policy, when it meets next Tuesday to assess the economy.
Many, however, believe the Fed will resume large-scale asset purchases in coming months to drive long-term interest rates lower to spur the economy and keep deflation risks at bay.
The US central bank already has cut overnight interest rates to near zero and pumped more than US$1.7 trillion into the economy through purchases of Treasury and mortgage-related debt.
Data on Thursday showed prices paid at the farm and factory gate rose 0.4 percent in August.
"There is no inflation. There is no deflation. It's disinflation," said John Canally, an economist at LPL Financial in Boston.
In the 12 months to August, the CPI rose 1.1 percent after a 1.2 percent increase the prior month. The rise was in line with market expectations.
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