Skip to main content

Inflation data points to firming economy

Inflation showed signs of stabilizing in May after a long decline, a potential comfort to Federal Reserve policymakers who want to avoid any chance of a debilitating bout of deflation.

The Labor Department said on Tuesday the consumer price index edged 0.1 percent higher last month after two straight months of declines, while the so-called core index, which excludes food and energy costs, rose 0.2 percent, just above the pace clocked in April.

 

The core index, which the U.S. central bank monitors closely because it is less volatile and provides a better sense of price trends, was up 1.7 percent in the 12 months through May.

The increase matched the gain in April and suggested that a worrisome downward trend in core inflation, which began a year ago, might be coming to an end as consumer demand strengthens.

That would be a relief to Fed officials who worry that a big drop in inflation could lead to a spiral of falling prices and wages. Removing this risk could make the Fed more comfortable with eventually paring back its bond-buying stimulus.

"Inflation pressures remain very subdued, but downside momentum is fading," said Eric Green, an interest rate strategist at TD Securities in New York.

The central bank began a two-day meeting on Tuesday and is expected to leave a bond-buying stimulus program unchanged.

While May's reading for 12-month core inflation remains below the Fed's 2 percent inflation target, a stabilization could make the Fed more comfortable paring back its economic stimulus programs as soon as this fall.

The overall CPI was up 1.4 percent from a year-ago in May, up three-tenths of a percentage point from the prior month.

"The economy has been performing decently," said Carl Riccadonna, an economist at Deutsche Bank in New York. "I don't think the Fed is concerned" with weak inflation data.

In May, the core price index rose with support from a 0.2 percent increase in clothing prices and a strong 0.3 percent increase in shelter costs.

Yields rose a bit on U.S. government debt and U.S. stock prices were higher at midday.

The Fed is widely seen to be moving closer to cutting back on its extraordinary support for the U.S. economy, which has shown signs of resilience despite tax hikes and government spending cuts this year. It has been buying $85 billion in bonds each month to lower borrowing costs and spur hiring.

A separate report showed U.S. housing starts rose less than expected in May, likely reflecting labor and material constraints. Still, the overall trend remained consistent with a housing market recovery that will help counter the drag on the economy from government austerity.

Housing starts rose 6.8 percent to a seasonally adjusted annual rate of 914,000 units. April's starts were revised up to show a 856,000-unit pace instead of the previously reported 853,000 units.

"What we see is a housing market that will continue to improve this year into 2014," said Gus Faucher, a senior macroeconomist at PNC Financial Services in Pittsburgh.

(Reporting by Jason Lange; Additional reporting by Lucia Mutikani and Paige Gance in Washington and by Karen Brettell and Richard Leong in New York; Editing by Neil Stempleman)

Popular posts from this blog

Study Abroad USA, College of Charleston, Popular Courses, Alumni

Thinking for Study Abroad USA. School of Charleston, the wonderful grounds is situated in the actual middle of a verifiable city - Charleston. Get snatched up by the wonderful and customary engineering, beautiful pathways, or look at the advanced steel and glass building which houses the School of Business. The grounds additionally gives students simple admittance to a few major tech organizations like Amazon's CreateSpace, Google, TwitPic, and so on. The school offers students nearby as well as off-grounds convenience going from completely outfitted home lobbies to memorable homes. It is prepared to offer different types of assistance and facilities like clubs, associations, sporting exercises, support administrations, etc. To put it plainly, the school grounds is rising with energy and there will never be a dull second for students at the College of Charleston. Concentrate on Abroad USA is improving and remunerating for your future. The energetic grounds likewise houses various

Best MBA Online Colleges in the USA

“Opportunities never open, instead we create them for us”. Beginning with this amazing saying, let’s unbox today’s knowledge. Love Business and marketing? Want to make a high-paid career in business administration? Well, if yes, then mate, we have got you something amazing to do!   We all imagine an effortless future with a cozy house and a laptop. Well, well! You can make this happen. Today, with this guide, we will be exploring some of the top-notch online MBA universities and institutes in the USA. Let’s get started! Why learn Online MBA from the USA? Access to More Options This online era has given a second chance to children who want to reflect on their careers while managing their hectic schedules. In this, the internet has played a very crucial in rejuvenating schools, institutes, and colleges to give the best education to students across the globe. Graduating with Less Debt Regular classes from high reputed institutes often charge heavy tuition fees. However onl

Sickening moment maskless 'Karen' COUGHS in the face of grocery store customer, then claims she doesn't have to wear a mask because she 'isn't sick'

A woman was captured on camera following a customer through a supermarket as she coughs on her after claiming she does not need a mask because she is not sick.  Video of the incident, which has garnered hundreds of thousands of views on Twitter alone, allegedly took place in a Su per Saver in Lincoln, Nebraska according to Twitter user @davenewworld_2. In it, an unidentified woman was captured dramatically coughing as she smiles saying 'Excuse me! I'm coming through' in the direction of the customer recording her. Scroll down for video An unidentified woman was captured dramatically coughing as she smiles saying 'Excuse me! I'm coming through' in the direction of a woman recording her A woman was captured on camera following a customer as she coughs on her in a supermarket without a mask on claiming she does not need one because she is not sick @chaiteabugz #karen #covid #karens #karensgonewild #karensalert #masks we were just wearing a mask at the store. ¿ o