Other data on Tuesday hinted at a steady build-up of inflation pressures, with import prices recording their largest increase in just over four years in May as the drag from a strong dollar and lower oil prices fades.
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Consumer prices increased 0.2 percent last month following a 0.4 percent April increase, the Commerce Department reported Thursday.
The consumer price index advanced by 0.2% month-on-month, according to the Bureau of Labor Statistics.
Food prices were up 0.3 percent in May, the biggest gain since a 0.9 percent rise in January.
The so-called core CPI, which strips out food and energy costs, rose 0.2 per cent after a similar gain in April.
Most economists predict inflation will creep higher in the months ahead since wages are rising, gas prices are no longer falling and the dollar has softened, making foreign goods slightly more expensive. On Wednesday, the USA central bank kept monetary policy unchanged but didn’t rule out possible rate increases, possibly as soon as later this year.
The Fed raised its benchmark overnight interest rate in December for the first time in almost a decade.
Imported food prices climbed 0.3 percent last month. Prices were expected to increase by 0.3%. “The rent index rose 0.4%, while the index for owners’ equivalent rent increased 0.3%”.
Looking at the 12 months through May, the costs of rent, transportation and medical care continued to have the biggest advances.
While overall prices for services rose 0.2 percent, healthcare costs slipped 0.1 percent. The previous month was modestly revised upward from 0.9 percent to 1.0 – and this is the highest figure we’ve seen since February 2014.
Prices for services rose 0.2% after inching up 0.1% in April.
While another report on Thursday showed an increase in the number of Americans applying for unemployment benefits last week, the trend remained consistent with a healthy labor market. In a separate report, the New York Fed said its Empire State business conditions index increased 15 points to 6.0 in June as new orders and shipments also swung into positive territory. Speaking of the Fed, the latest FOMC meeting begins today, and following the two-day meeting we’ll hear from Chairwoman Janet Yellen tomorrow afternoon.
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Prices for U.S. Treasuries rose on the Fed interest rate decision, while the dollar.DXY fell against a basket of currencies. The policy-making committee said it expected inflation to remain below its target through 2017. Economists had expected a 0.2% gain.
