US CPI up on rents and medical costs
Print Edition
RISING rents and medical costs lifted underlying US inflation in January by the most in nearly four and a half years, signs of a pickup in price pressures that could allow the Federal Reserve to raise interest rates this year.
The Labor Department said yesterday that its Consumer Price Index, excluding the volatile food and energy components, added 0.3 percent last month. That was the biggest gain since August 2011 and followed a 0.2 percent rise in December.
“It is a policy-maker’s dream come true, they wanted more inflation and they got it,” said Chris Rupkey, chief economist at MUFG Union Bank in New York.
In the 12 months through January, the core CPI advanced 2.2 percent, the largest rise since June 2012 and exceeded the 1.9 percent average annual increase over the last 10 years.
The core CPI rose 2.1 percent in December. The Fed has a 2 percent inflation goal and checks a price measure that is running below the core CPI.
Economists polled by Reuters had forecast core CPI up 0.2 percent last month and rising 2.1 percent from a year ago.
Inflation is being watched for clues on whether the Fed would continue raising interest rates this year after the US central bank lifted borrowing costs in December for the first time in nearly a decade.
Tighter financial market conditions in the wake of a recent sharp stock market sell-off and slowing domestic and global growth have wiped out bets for a March rate increase. The probabilities of rate hikes for the rest of the year are slim.
Signs of a pickup in underlying inflation are to be welcomed by Fed officials, but sharp gains remain a challenge amid very low inflation hopes by households.
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