Key inflation gauge rises at slowest pace in four months

Washington

A KEY measure of US consumer prices rose in September at the slowest pace in four months, signalling little threat of accelerating inflation as the economy recovers.

The consumer price index (CPI) rose 0.2 per cent from the prior month after a 0.4 per cent gain in August. Compared with a year earlier, the gauge increased 1.4 per cent, after August's 1.3 per cent rise.

The core CPI, which excludes volatile food and fuel costs and is viewed by Federal Reserve policy makers as a more reliable gauge of price trends, also increased 0.2 per cent from the prior month and climbed 1.7 per cent from a year ago, Labor Department figures showed on Tuesday.

The key inflation figures on a monthly and annual basis matched the median forecasts in a Bloomberg survey of economists.

The moderation in consumer inflation occurred despite another hefty increase in used-vehicle prices and reflects subdued demand in some parts of the economy, as the coronavirus continues to disrupt business and millions of Americans remain unemployed.

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Even so, the rebound in spending from the depths of the pandemicinduced slowdown has allowed for a gradual increase in prices.

Fed policy makers are determined to push inflation higher, and have signalled they expect to hold interest rates near zero at least till 2023 to help achieve that goal.

The US central bank targets 2 per cent inflation, measured by the Commerce Department's personal consumption expenditures price index (PCE).

That gauge has been almost continually below that goal since 2012, with PCE running a little bit weaker than CPI on average during that time.

Fed chair Jerome Powell said in late August that the central bank will now aim to achieve 2 per cent inflation on average over time and will tolerate periods when price pressures moderately overshoot that level.

That means it will be slower to raise rates in response to declining unemployment than in the past.

The CPI report showed used-vehicle prices jumped by 6.7 per cent from a month earlier, the most in data back to 1969.

At the same time, inflation was restrained by a modest gain in shelter costs, which rose 0.1 per cent for a second month.

Apparel prices, the cost of motor vehicle insurance and airfares declined from a month earlier.

Grocery store prices declined 0.4 per cent in September, while food away from home increased by the most since July 2008. BLOOMBERG