WASHINGTON: US consumer prices rose moderately in April and underlying inflation remained muted, suggesting the Federal Reserve could keep interest rates unchanged for a while.
The persistently benign inflation reported by the Labor Department on Friday could, however, increase White House pressure on the US central bank to cut rates. President Donald Trump has repeatedly criticised the Fed for tightening monetary policy, arguing that inflation was low.
“Great Consumer Price Index just out. Really good, very low inflation! We have a great chance to ‘really rock!’ Good numbers all around,” Trump tweeted after the report.
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 weak inflation readings “may wind up being transient.” The Consumer Price Index increased 0.3 per cent last month, lifted by rising gasoline, rents and health care costs. The CPI gained 0.4 per cent in March. It increased 2.0 per cent in the 12 months through April after advancing 1.9 per cent in March.
Economists polled by Reuters had forecast the CPI increasing 0.4 per cent in April and rising 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 now 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 2.0 per cent in March.
The Fed, 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.
The dollar fell against a basket of currencies after the CPI data, while US Treasuries extended gains.
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, the first drop since June 2017, after gaining 0.3 per cent in the prior month.
Food consumed at home dropped 0.5 per cent, the largest decline since March 2016.
But consumers paid more for rent and health care. 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.
Health care costs increased 0.3 per cent, matching March’s gain. There were increases in the cost of prescription medication and doctor visits. But the cost of hospital services fell 0.5 per cent.
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 also declines in the cost of airline fares, alcoholic beverages and tobacco.
Prices for household furnishings fell for the first time in 10 months. The cost of new vehicles ticked up 0.1 per cent after rising 0.4 per cent in March.