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U.S. Consumer prices rose more than expected in January, with underlying inflation recording its largest gain in one year, bolstering expectations that the Federal Reserve will need to accelerate the pace of rate hikes. interest this year.
The Labor Department's strong inflation report Wednesday put more pressure on US financial markets, which were frightened by an increase in annual wage growth in January.
Prices of US Treasury bills fell on inflation data. The dollar first rose against a basket of currencies, but then gave up the gains. Shares on Wall Street began to fall before clearing losses.
Investors worry that inflation, which is perceived to be driven by tighter labor markets and increased public spending, could force the Fed to raise rates this year more provided that.
It would slow down economic growth. The US central bank has scheduled three rate increases for this year, the first increase being expected in March.
"The job of the Fed now is to prevent the overheating of the economy," said Gus Faucher, chief economist at PNC Financial in Pittsburgh. "The task of the Fed is complicated by recent tax cuts and spending agreements."
The Labor Department said its consumer price index rose 0.5% last month as households pay more for gasoline, rental housing and health care. The CPI rose 0.2% in December. The rise in the CPI from one year to the next remained unchanged at 2.1%, with significant price gains over last year not having have been taken into account in the calculation.
Excluding volatile food and energy components, the CPI climbed 0.3%. This was the largest increase since January 2017 and was up 0.2% in December. The year-on-year increase in the core CPI remained unchanged at 1.8% in January, also due to less favorable base effects.
Economists polled by Reuters had forecast that the CPI would rise by 0.3% in January and that the core CPI would rise by 0.2%. The core CPI is considered a better measure of underlying inflationary trends. The Fed follows a different index, the price index of consumer spending excluding food and energy, which has consistently been below the 2% target of the central bank since mid-2012.
STRENGTHENING THE INFLATION
The base effects will become more favorable in March, which economists believe would pave the way for higher annual inflation readings. Average hourly earnings climbed 2.9% in January, the largest increase since June 2009, compared to 2.7% in December.
A recovery in wage growth as the labor market reaches full employment is expected to contribute to higher inflation this year. Tensions on prices are also fueled by fiscal stimulus measures in the form of a $ 1.5 trillion tax cuts program and an increase in government spending.
Rising inflation could hurt consumer spending, which is already showing signs of slowing. A separate Department of Commerce report showed Wednesday that retail sales fell 0.3% in January, the largest decline since February 2017, after remaining unchanged in December.
Excluding automobiles, gasoline, building materials and food services, retail sales remained unchanged last month, after falling 0.2% in December. These basic retail sales most closely match the consumer spending component of gross domestic product.
Consumer spending, however, remains supported by a strong labor market, rising wages and tax cuts.
"Consumers can make up for lost time," said Jennifer Lee, Senior Economist at BMO Capital Markets in Toronto.
Inflation last month was driven by gasoline prices, which rebounded 5.7% after falling 0.8% in December.
Crude oil prices climbed in January due to strong global demand and weak dollar. Food prices rose 0.2% in January, likely reflecting a weaker dollar.
The core CPI was boosted by rising rents. The equivalent rent of the owners' principal residence, which corresponds to what a renter would pay to rent or receive from a rental of a house, increased by 0.3% after increasing by
Media : Euronews
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