WASHINGTON: US consumer prices recorded their biggest increase in eight months in September as gasoline prices soared in the wake of hurricane-related production disruptions at oil refineries in the Gulf Coast, but underlying inflation remained muted.
The mixed report from the Labor Department on Friday comes as Federal Reserve officials have been engaged in a vigorous debate on the inflation path and suggests a December interest rate increase is not a done deal.
Prices for US Treasuries rose and stocks on Wall Street hit record highs. The dollar was little changed against a basket of currencies. Policymakers could, however, find solace in another report indicating that the economy was swiftly recovering from the damage inflicted by Hurricanes Harvey and Irma, with a strong rebound in retail sales last month.
The Labor Department said its Consumer Price Index increased 0.5 per cent last month after advancing 0.4 per cent in August. The rise was the biggest since January and lifted the year-on-year gain in the CPI to 2.2 per cent from 1.9 per cent in August.
Gasoline prices surged 13.1 per cent last month, accounting for 75 per cent of the increase in the CPI. The jump in gasoline prices was the largest since June 2009 and followed a 6.3 per cent gain in August.
The Labor Department said Harvey was reported to have impacted refinery capacity in the Gulf Coast and was likely a factor in last month’s increase in gasoline prices.
Outside gasoline, price pressures were benign. Excluding the volatile food and energy components, consumer prices ticked up 0.1 per cent as the increase in rental accommodation slowed and the cost of new motor vehicles, furniture and medical care declined. The so-called core CPI rose 0.2 per cent in August.
In the 12 months through September, the core CPI increased 1.7 per cent. The year-on-year core CPI has now advanced by the same margin for five consecutive months.
The Fed tracks the personal consumption expenditures price index excluding food and energy, which has consistently undershot the US central bank’s 2 per cent target for more than five years. Fed Chair Janet Yellen has said that temporary factors such as one-off price cuts by wireless telephone companies are holding back inflation.
Minutes of the Fed’s September 19-20 meeting published on Wednesday showed “many participants expressed concern that the low inflation readings this year might reflect not only transitory factors, but also the influence of developments that could prove more persistent.” — Reuters
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