US consumer prices rise but underlying inflation tame

Fed last week kept interest rates unchanged and signalled little desire to adjust policy

The US Federal Reserve building in Washington DC. Photograph: Karen Bleierkaren / Getty Images

The US Federal Reserve building in Washington DC. Photograph: Karen Bleierkaren / Getty Images

 

US consumer prices rose in April but underlying inflation remained muted, suggesting the Federal Reserve could keep interest rates unchanged for a while.

The Labour Department said on Friday its Consumer Price Index (CPI) increased 0.3 per cent last month, lifted by rising gasoline, rents and healthcare costs. The CPI gained 0.4 per cent in March.

In the 12 months through April, the CPI increased 2 per cent after advancing 1.9 per cent in March. Economists polled by Reuters had forecast the CPI increasing 0.4 per cent in April and advancing per cent 2.1 per cent year-on-year.

Excluding the volatile food and energy components, the CPI edged up 0.1 per cent as apparel prices dropped for a second straight month. The so-called core CPI has increased by the same margin for three straight months.

In the 12 months through April, the core CPI increased 2.1 per cent after gaining 2 per cent in March.

The Fed last week kept interest rates unchanged and signalled little desire to adjust monetary policy anytime soon. Fed chairman Jerome Powell said he believed the recent weak inflation readings “may wind up being transient”.

The US central bank, which has a 2 per cent inflation target, tracks a different measure, the core personal consumption expenditures (PCE) price index, for monetary policy.

The core PCE price index increased 1.6 per cent on a year-on-year basis in March, the smallest rise in 14 months, after advancing 1.7 per cent in February. The April PCE price index data will be published later this month.

In April, gasoline prices rose 5.7 per cent, accounting for more than two-thirds of the increase in the CPI last month, after surging 6.5 per cent in March.

Food prices dipped 0.1 per cent in April after gaining 0.3 per cent in the prior month. Food consumed at home dropped 0.5 per cent. But consumers paid more for rent.

Owners’ equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, increased 0.3 per cent last month after rising by the same margin in March.

Healthcare costs increased 0.3 per cent, matching March’s gain. Apparel prices declined 0.8 per cent last month.

They plunged 1.9 per cent in March, which was the biggest drop since January 1949, after the government introduced a new method and data to calculate apparel prices.

Prices for used motor vehicles and trucks fell 1.3 per cent, decreasing for a third straight month. There were decreases in the cost of airline fares, household furnishings and tobacco. The cost of new vehicles ticked up 0.1 per cent after rising 0.4 per cent in March. – Reuters