Rents lift US core inflation

[WASHINGTON] US underlying consumer prices picked up in January, while the number of Americans filing claims for unemployment benefits rose slightly last week, suggesting the economy was stable enough for the Federal Reserve to keep interest rates on hold this year.

The consumer price index excluding the volatile food and energy components rose 0.2 per cent in January as Americans paid more for accommodation and apparel, after edging up 0.1 per cent in December. The so-called core CPI was up by an unrounded 0.2423 per cent last month. Underlying inflation in January was also lifted by increases in the prices of airline tickets, healthcare, recreation and education.

In the 12 months through January, the core CPI increased 2.3 per cent, rising by the same margin for four straight months. Economists polled by Reuters had forecast the core CPI increasing 0.2 per cent in January and gaining 2.2 per cent year-on-year.

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 December. It undershot its target in 2019. January PCE price data will be published later this month.

Inflation is likely to be supported by a tightening labour market.

In a second report on Thursday, the Labour Department said initial claims for state unemployment benefits rose 2,000 to a seasonally adjusted 205,000 for the week ended Feb 8.

Economists had forecast claims rising to 210,000 in the latest week. The four-week moving average of initial claims, considered a better measure of labour market trends as it irons out week-to-week volatility, was unchanged at 212,000 last week.

The reports from the Labour Department on Thursday followed on the heels of Fed Chair Jerome Powell's remarks to lawmakers this week that the "economy is in a very good place, performing well." Mr Powell added that "over the next few months, we expect inflation to move closer to 2 per cent, as unusually low readings from early 2019 drop out of the 12-month calculation."

The US central bank last month left interest rates steady. It is widely expected to keep monetary policy on hold this year after it reduced borrowing costs three times in 2019.

REUTERS