I think today’s inflation numbers won’t change that, but certainly will remove pressure for any “surprise” interest rate increases in the near future.
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CPIH, which the ONS are now using as their headline measure and which includes owner occupiers’ housing costs, shows a 12-month inflation rate of 2.7%, up from 2.6% in April.
The Fed’s preferred gauge, the price index for personal-consumption expenditures, poked above the central bank’s 2% target in February but settled down to 1.7% in April, the most recent month for which data is available.
Consumer prices, excluding food and energy costs, inched up by a seasonally adjusted 0.1%, below forecasts for 0.2%.
United States retail sales also disappointed. While some of the drop in monthly retail sales reflected lower gasoline prices, which weighed on receipts at service stations, details of the report were generally weak.
The dollar fell to a seven-month low against a basket of currencies on the data, before retracing some of the losses.
The rise is likely to raise pressure on the Bank to consider increasing interest rates beyond 0.25% when its Monetary Policy Committee meets later this week.
Meanwhile price hikes from utility companies sent the cost of electricity soaring four per cent, and comes after two of the big six energy providers – SSE and E.ON – introduced tariff increases at the end of April.
CPI inflation rose to 2.9% in May, up from 2.7% in April, according to the latest ONS statistics.
A big drop in gasoline prices played a big part. Still, the fact that these price pressures are proving slow to show up adds considerable risk to additional Fed hikes later this year, added TD Economics.
The annual increase in factory input prices slowed to 11.6 percent last month, the weakest since September a year ago, and the ONS said it’s “continuing its decline from 19.9 percent in January 2017 following the recent strength of sterling”.
Labor markets in the US continue to be solid, while communications from FOMC members have been clear that they continue to be focused on a tightening policy path.
Local government employment has fallen to a record low of 2.1 million, while jobs in private firms increased by 115,000 over the past quarter to 26.5 million, the highest on record. The Atlanta Fed is forecasting GDP rising at a 3.0 per cent annualised rate in the second quarter.
Over the past 12 months, consumer prices are up 1.9 percent while core inflation has risen 1.7 percent.
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Computer equipment also saw a steep rise, with areas like data processing jumping 3.4 per cent.
