US consumer prices, excluding volatile food and energy costs, rose at the quickest pace in 15 months last month, suggesting a long period of slowing inflation had run its course.
The core consumer price index increased 0.2 percent after a 0.1 percent rise in December, the US Department of Labor said on Thursday. It was the largest increase since October 2009.
Economists largely agreed inflation had bottomed, but said the turnaround in prices was unlikely to be so swift as to trouble policymakers at the US Federal Reserve.
“Inflation has bottomed out, that’s actually what the Fed would like to see happen and these numbers are by no means alarming,” said Stuart Hoffman, chief economist at PNC Financial in Pittsburgh.
“The question is, if inflation is coming back, how fast and how far? This data tells me it’s not coming back quickly,” he said.
Policymakers are divided about the Fed’s next move. Chicago Fed president Charles Evans said on Thursday he saw little inflationary pressure until the US unemployment rate drops significantly.
However, his counterpart at the Dallas Fed, Richard Fisher, warned of upward pressures on prices and said he would not support any further stimulus after the Fed’s US$600 billion bond-buying program expires in June.
“I cannot foresee any circumstance at present that would lead me to support any further expansion of our initiative on that front,” Fisher said.
The increase in core prices last month, which was a touch above economists’ expectations for a 0.1 percent gain, was driven by a 1 percent surge in the cost of apparel and a 2.2 percent jump in airline fares. Shelter costs, which account for 40 percent of core CPI, rose for a fourth straight month.
The outlook for soft inflation was supported by a rise in applications for unemployment benefits last week, which suggested the labor market recovery would remain gradual, restricting wage growth.
The Labor Department said hourly earnings adjusted for inflation fell 0.1 percent last month, a third straight drop.
Other data, however, showed the economic recovery continues to strengthen.
A measure of factory activity in the US Mid-Atlantic region has risen this month to its highest level since January 2004, with the employment subindex reaching its highest point since April 1973. A separate gauge of the country’s economic health rose marginally last month.
Overall consumer prices rose 0.4 percent after increasing by the same margin in December, with food and energy accounting for more than two-thirds of the increase. Economists had expected the headline CPI to rise 0.3 percent last month.
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