Underlying U.S. Inflation Picks Up to Keep Fed Hike on Track

Posted on Posted in Uncategorized

A key measure of U.S. inflation picked up as expected in November on rising costs for housing, medical care, and used cars, reinforcing expectations that the Federal Reserve will raise interest rates next week.

The so-called core consumer price index, which excludes volatile food and energy costs, rose 0.2 percent from the prior month and 2.2 percent from a year earlier, according to a Labor Department report Wednesday. That matched the median estimates in a Bloomberg survey of economists. The broader CPI was unchanged from the prior month, also in line with projections, as energy prices plunged.

While the CPI report “cements a rate hike next week,” the Fed “will have a window to pause in the first half of 2019,” said Ryan Sweet, head of monetary policy research at Moody’s Analytics Inc. in West Chester, Pennsylvania. “Risks to the Fed’s inflation outlook are weighted to the downside” amid falling energy costs and sliding price expectations, which indicate that “inflation isn’t going to create any more sense of urgency for future hikes,” he said.

The report indicates underlying inflation is steadying around the Fed’s 2 percent goal, without flaring up, as prices get support from the recent pickup in wages as well as higher materials costs amid the tariff war with China. Still, investors and economists are divided about the path of interest rates beyond a widely projected hike at the central bank’s Dec. 18-19 meeting.

Read more on Bloomberg

Leave a Reply

Your email address will not be published. Required fields are marked *