WASHINGTON, July 11 — Rising prices for housing, used cars and medical care helped drive US consumer inflation higher last month despite flat or falling costs for food and fuel, the government reported today.
The hotter-than-expected inflation numbers come as the Federal Reserve is poised to cut interest rates for the first time in a decade, due to fears of a global economic slowdown and uncertainties fueled by trade conflicts.
The absence of inflation in recent years despite solid economic growth removed pressure on the US central bank to keep raising the benchmark lending rate, but the surprise jump in June might put in doubt any further Fed rate cuts this year.
The Consumer Price Index, which tracks costs for household goods and services, rose 0.1 per cent compared to May, a notch above analyst forecasts, the Labour Department reported.
Gasoline and fuel oil, electricity and piped natural gas all fell, but the costs for shelter — rent and the equivalent expense for homeowners — surged compared to May and have been rising steadily amid a tight housing market.
Meanwhile, used car prices spiked 1.6 per cent and an uptick in medical care costs also helped lift the index, according to the data. Household furnishings were up 0.8 per cent, the biggest jump in 28 years.
Excluding the volatile food and energy categories, the closely-watched “core” CPI rose 0.3 per cent compared to May — the largest one-month gain in 18 months.
But inflation remains tame over the past year, with the CPI slowing to 1.6 per cent compared to June 2018, two tenths of a point lower than in May and the second straight year-on-year decline. The core index is up 2.1 per cent compared to a year ago.
The Fed is due to hold its next policy meeting at the end of this month and in congressional testimony yesterday, Fed Chairman Jerome Powell said many central bankers believed the case for a rate cut had “strengthened” in recent weeks.
Analysts don’t expect the inflation data to change the Fed’s plan to cut the key lending rate at the end of the month.
“This report won’t stop the Fed from easing on the 31st but it does suggest that a 50 (basis point) cut would be risky,” Ian Shepherdson of Pantheon Macroeconomics said in a client note. — AFP