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June core CPI posts biggest gain in nearly 1½ years
US UNDERLYING consumer prices increased by the most in nearly one-and-a-half years in June amid solid gains in the costs of a range of goods and services, but will probably not change expectations that the Federal Reserve will cut interest rates this month.
The Labor Department said on Thursday that its consumer price index (CPI) excluding the volatile food and energy components rose 0.3 per cent last month. That is the largest increase since January 2018 and followed four straight monthly gains of 0.1 per cent.
The so-called core CPI was boosted by strong increases in the prices for apparel, used cars and lorries, as well as household furnishings.
There were also increases in the cost of health care and rents. In the 12 months till June, the core CPI climbed 2.1 per cent after advancing 2 per cent in May.
The overall CPI edged up 0.1 per cent last month, held back by cheaper petrol and food prices. The CPI rose 0.1 per cent in May. It increased 1.6 per cent year-on-year in June after rising 1.8 per cent in May.
Economists polled by Reuters had forecast the CPI to be unchanged in June and rising 1.6 per cent year-on-year.
The Fed, which has a 2 per cent inflation target, tracks the core personal consumption expenditures (PCE) price index for monetary policy. The core PCE price index increased 1.5 per cent year-on-year in May and has undershot its target this year.
Fed chairman Jerome Powell on Wednesday told lawmakers that the US central bank would "act as appropriate" to protect the economy from rising risks such as trade tensions and slowing global growth. He also said that "there is a risk that weak inflation will be even more persistent than we currently anticipate".
Policymakers from the US central bank are scheduled to meet on July 30-31. The Fed last month downgraded its inflation projection for 2019 to 1.5 per cent from the 1.8 per cent projected in March.
In June, petrol prices dropped 3.6 per cent after falling 0.5 per cent in May. Food prices were unchanged last month after rebounding 0.3 per cent in May. Food consumed at home fell 0.2 per cent.
Owners' equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, rose 0.3 per cent in June, matching May's gain. Healthcare costs increased 0.3 per cent, after a similar advance in May. Apparel prices surged 1.1 per cent after being unchanged in May.
Prices for these goods tumbled in March and April after the government introduced a new method and data to calculate their cost. The prices of used motor vehicles and lorries jumped 1.6 per cent in June after declining for four straight months.
The price of household furnishings and operations rose 0.8 per cent, the biggest gain since 1991, driven by rising costs for gardening and lawncare services. REUTERS