US consumer prices increase moderately in December

[WASHINGTON] US consumer prices rose slightly in December and monthly underlying inflation pressures retreated, which could allow the Federal Reserve to keep interest rates unchanged at least through this year.

The Labour Department said on Tuesday its consumer price index increased 0.2 per cent last month after climbing 0.3 per cent in November. The monthly increase in the CPI has been slowing since jumping 0.4 per cent in October. In the 12 months through December, the CPI rose 2.3 per cent after gaining 2.1 per cent in the 12 months through November.

Economists polled by Reuters had forecast the CPI would rise 0.3 per cent in December and advance 2.3 per cent on a year-on-year basis.

Excluding the volatile food and energy components, the CPI edged up 0.1 per cent after gaining 0.2 per cent in November. The so-called core CPI was up by an unrounded 0.1133 per cent last month compared to 0.2298 per cent in November.

Underlying inflation in December was held back by declines in the costs of used cars and trucks, airline tickets and household furnishing and operations, which offset increases in the prices of healthcare, apparel, new motor vehicles, recreation, and motor vehicle insurance.

In the 12 months through December, the core CPI increased 2.3 per cent, the largest gain since October 2018, after rising 2.3 per cent in November.

The Fed tracks the core personal consumption expenditures (PCE) price index for its 2 per cent inflation target. The core PCE price index rose 1.6 per cent on a year-on-year basis in November. It undershot its target in the first 11 months of 2019. December PCE price data will be published later this month.

The US central bank last month left interest rates steady and signaled monetary policy could remain on hold this year after it reduced borrowing costs three times in 2019.

Minutes of the Fed's Dec 10-11 meeting published early this month showed policymakers generally expected inflation would eventually hit the central bank's target as the economy continued to expand and resource utilization remained high.

There were, however, concerns among some officials "that global or technology-related factors were exerting downward pressure on inflation that could be difficult to overcome."

Moderate inflation was underscored by last week's employment report, which showed the increase in annual wage growth retreating below 3.0 per cent in December, despite the unemployment rate holding at near a 50-year low of 3.5% and a broader measure of labor market slack dropping to a record 6.7 per cent.

In December, gasoline prices advanced 2.8 per cent after rising 1.1 per cent in November. Food prices gained 0.2 per cent after edging up 0.1 per cent in November. Food consumed at home ticked up 0.1 per cent.

Owners' equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, increased 0.2 per cent for a third straight month.

Healthcare costs jumped 0.6 per cent in December after rising 0.3 per cent in the prior month. Apparel prices increased 0.4 per cent after nudging up 0.1 per cent in November. New vehicle prices rebounded 0.1 per cent after declining for five straight months.

Prices for used motor vehicles and trucks dropped 0.8 per cent last month after increasing 0.6 per cent in November. 

REUTERS