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VOL. 40 | NO. 20 | Friday, May 13, 2016
US consumer prices post 0.4 percent April increase
WASHINGTON (AP) — U.S. consumer prices jumped in April by the largest amount in more than three years, reflecting a surge in the price of gasoline and other energy products. But outside of volatile food and energy, core inflation posted another modest gain.
The Labor Department said Tuesday that overall consumer prices rose 0.4 percent in April after a 0.1 percent increase in March. It was the largest one-month advance since a 0.6 percent increase in February 2013. Core inflation was up 0.2 percent compared to a 0.1 percent March gain.
Over the past 12 months, overall inflation is up 1.1 percent while core prices have risen 2.1 percent, both considered modest gains. The fact that inflation has remained low has given the Federal Reserve the flexibility to keep interest rates at ultra-low levels.
Energy prices increased 3.4 percent last month, the biggest one-month surge in three years. But even with the increase, energy costs are still 8.9 percent below the levels of a year ago. The nationwide average for gasoline is currently $2.22, according to a AAA survey, up 11 cents from a month ago but still below the $2.70 per gallon price of a year ago.
The Fed raised its benchmark interest in December, pushing it up by a modest quarter-point from the record low near zero, where it had been for seven years. In December, the Fed also signaled that it expected to raise rates four more times in 2016. But in January, global markets went into a nosedive over concerns that China, the world's second largest economy, was slowing more than had been expected. Also, the U.S. economy grew at an annual rate of just 0.5 percent in the first quarter, the weakest in two years.
Faced with those developments, the Fed decided to keep rates unchanged and in March signaled that it now expected to raise rates only twice this year, not the four increases it had forecast in December. The Fed's next meeting is in June and many analysts believe with inflation remaining tame, the Fed will once again hold off on a rate hike. Many believe the central bank may decide to increase rates just once this year.
For April, food costs edged up 0.2 percent and are up a modest 0.9 percent over the past year.
The 2.1 percent increase in core inflation over the past 12 months was led by a 6 percent rise in the cost of auto insurance over the past 12 months and a 3.7 percent increase in tobacco prices and a 3 percent increase in medical care. Areas posting smaller gains over the past 12 months include airline fares, which are up just 0.4 percent over that period and new care prices, which are unchanged over the past year.