Energy costs push US consumer inflation above Fed target
Thanksgiving Day shoppers push loaded up carts during the "Black Friday" sales at a Target store in Culver City, California, on Nov 24, 2016. (Mark RALSTON/AFP)
WASHINGTON: Mounting gasoline prices helped drive US consumer inflation higher in November, pushing the annual measure above the central bank's target, according to a government report on Wednesday (Dec 13).The news comes as the Federal Reserve is poised to raise interest rates later on Wednesday, the third rate hike of the year, and while it gives some ammunition to those officials worried about the dangers of inflation, there are signs in the report that prices pressures have softened.The Consumer Price Index, which tracks costs for household goods and services, gained 0.4 per cent from October, in line with analysts' expectations.But the 12-month measure rose 2.2 per cent. That put it above the Fed's two percent target, although the Fed focuses on a different inflation index.Most of last month's increase was driven by energy prices which rose 3.9 per cent, as the price of gasoline at the pump surged 7.3 per cent compared to October.But outside the volatile energy prices, there were signs the price pressures were less pronounced.
Excluding food and fuel, the "core" CPI gained only 0.1 per cent in November, while the 12-month core actually slowed to 1.7 per cent, down a tenth from October.The November result was unlikely to settle the disagreement among Fed officials about whether inflation will finally accelerate after months of weakness.The Fed's preferred inflation measure, the Personal Consumption Expenditures price index, remains well below the two per cent target and shows few signs it will rise soon. The 12-month core PCE is just 1.4 per cent.And while the 12-month CPI measure exceeded two percent for the second time since April, some argue it should be allowed to run higher for some time to compensate for its extended weakness.
The Fed had largely written off weak inflation this year as the product of "transitory" factors such as sudden drops in pharmaceutical and mobile telephone service prices.But Fed chair Janet Yellen has acknowledged that the central bank's understanding of the forces driving inflation is not perfect.
Source : http://www.channelnewsasia.com/news/business/energy-costs-push-us-consumer-inflation-above-fed-target-9496694