WASHINGTON (Reuters) – US consumer prices UU They fell for the first time in nine months in December amid a fall in gasoline prices, but underlying inflationary pressures remained firm as the costs of rental housing and medical care increased steadily.
FILE PHOTO: Customers line up with their cars at a Costco gas station in Austin, Texas, USA. UU., December 14, 2016. REUTERS / Mohammad Khursheed / Stock Photo
In general, the Labor Department's report on Friday painted a picture of inflation that was under control, with increases in some categories offset by declines elsewhere. This probably supports recent statements by Federal Reserve officials who promise patience to raise interest rates this year.
"The Fed will take this as further evidence that price pressures are accumulating more slowly than some fear, due to the strong growth of the late and narrow labor market," said James McCann, senior economist at Aberdeen Standard Investments in Boston. "Undoubtedly, it seems to justify the Fed's message about being more patient with rate increases."
The consumer price index fell 0.1 percent last month, the first decline and the weakest reading since March, after having remained unchanged in November. In the 12 months to December, the CPI rose 1.9 percent, decelerating from November's 2.2 percent gain.
Excluding volatile food and energy components, the CPI increased 0.2 percent, advancing in the same margin for the third consecutive month. In the 12 months to December, the so-called core CPI rose 2.2 percent, matching the November increase.
The December inflation readings were in line with the economists' expectations. The CPI rose by 1.9 percent in 2018, decelerating from a 2.1 percent increase in 2017. But the core CPI rose 2.2 percent, compared to 1.8 percent in 2017.
The Federal Reserve, which has an inflation target of 2 percent, follows a different measure, the price index of personal consumption expenditure (PCE), for monetary policy.
The central PCE price index increased 1.9% year-on-year in November, after having increased 1.8% in October. It reached 2 percent in March for the first time since April 2012.
The central bank of the USA UU He forecast two increases in interest rates this year, but several politicians, including President Jerome Powell, have said they would be cautious in restricting monetary policy.
Powell reiterated that opinion on Thursday, saying that "especially with low inflation and under control we have the ability to be patient and observe with patience and care", while the central bank monitored economic data and financial markets in search of risks for growth.
The minutes of the December 18-19 policy meeting of the US central bank. UU Published on Wednesday, they showed that "many" officials felt that the Fed "could afford to be patient about further policy reaffirmation."
But with core inflation holding firm despite a strong dollar and a slowdown in global growth, economists say more rate hikes can not be ruled out this year. In addition, a tighter labor market is driving wage growth.
"If underlying inflation holds firm, the Fed will continue to consider additional rate hikes this year," said Sam Bullard, senior economist at Wells Fargo Securities in Charlotte, North Carolina.
The Fed raised borrowing costs four times in 2018. The dollar had little change against a basket of currencies, while US Treasury prices rose. Stocks on Wall Street traded down after a five-day rally.
SUPPORT TO BUY THE POWER
Low inflation is increasing the purchasing power of households, which could keep consumer spending supported. While the economy is likely to have seen strong growth in the fourth quarter, an ongoing partial closure of the federal government is throwing a cloud into the economy.
The partial closure began on December 22 when President Donald Trump demanded that the United States Congress grant him $ 5.7 billion this year to help build a wall on the United States-Mexico border.
According to JPMorgan, the closure, which left 800,000 employees without work or working without pay and delayed the publication of data from the Census Bureau and the Economic Analysis Office, was subtracting 0.1-0.2 percentage points from the Quarterly growth of gross domestic product every week.
Average weekly earnings adjusted for inflation increased 0.7 percent in December, the highest gain since August 2015, after falling 0.1 percent in November. Weekly earnings increased 1.2 percent in the 12 months to December, the largest amount since July 2016, from 0.6 percent in November.
Last month, gasoline prices fell by 7.5 percent, the biggest decline since February 2016, after falling 4.2 percent in November. But Americans paid more for food, with prices rising 0.4 percent. That was the biggest gain since May 2014 and followed an increase of 0.2 percent in November.
The equivalent rent for the owners' main house, which is what the homeowner would pay for renting a home, advanced 0.2 percent in December after having increased 0.3 percent in November. Health care costs increased 0.3 percent last month after jumping 0.4 percent in November.
Clothing prices remained unchanged in December after falling 0.9 percent in the previous month. Airline fares plummeted 1.5 percent and prices for used motor vehicles and trucks fell 0.2 percent after climbing for two consecutive months.
But the prices of home furnishings increased, probably due to the tariffs imposed by the Trump administration on a range of imported Chinese products. The prices of new motor vehicles remained unchanged for the second consecutive month.
Report of Lucia Mutikani; Edition by Andrea Ricci