Tuesday’s economic reports came as influential New York Fed President William Dudley said the United States central bank could raise interest rates next month, citing a tightening labour market that he said was starting to spur faster wage growth.
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The U.S. Department of Labor has released its consumer price index (CPI) for July, and the monthly number was flat at 0.0%.
Consumers have to dig much deeper into their pockets this month to put bread on the table, as the monthly inflation for the food and non-alcoholic beverages category increased by a staggering 12.2 percent in July, compared to 5.3 percent recorded in July 2015.
Core CPI, stripping out volatile food and energy, was up 0.1 percent from the previous month.
The 0.6% reading for July represents a 0.1% increase from June’s figure, bringing inflation to its highest rate since November 2014, though remaining “relatively low in the historic context”.
The Fed’s preferred inflation gauge, the Commerce Department’s personal-consumption expenditures price index, has undershot the central bank’s 2% inflation target for more than four years.
The US dollar fell to more than 7-week lows against the euro, yen and Swiss franc after the data, while prices of US Treasuries held earlier gains. USA stock futures were trading slightly lower.
Late on Monday, financial markets were placing a 46.7 % probability of a rate increase at the Fed’s December policy meeting, according to CME Group’s FedWatch tool. The Fed has left interest rates unchanged after a single rate hike last December.
The US central bank raised its benchmark overnight interest rate in December for the first time in almost a decade. Headline prices didn’t make any progress in July as energy costs fell.
The rises were slightly offset by falling costs for toys and games as well as social housing rent.
Home rental costs also slowed sharply, rising just 0.1pc on the month and 1.3 per cent on the year – the smallest annual rise in six years.
Driven by costlier food items, WPI-based inflation soared to 23-month high of 3.55 per cent in July, prompting demands for strong government action to address supply issues.
The US cost of living was little changed in July, a sign subdued inflationary pressures will give Federal Reserve policymakers reason to keep interest rates low.
Tobacco, which is entirely imported, increased by 0.1 per cent on the month and 4.9 per cent over the past year.
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The PCE index was up 0.9% in June from a year earlier. Groundbreaking on multi-family housing projects with five units or more jumped to the highest level since September 2015.
