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US-ECONOMY-INFLATION-PERSONAL-INCOME
Housing, autos drive US inflation higher in June
WASHINGTON, July 12, 2019 (BSS/AFP) – Rising prices for housing, used cars
and medical care helped drive US consumer inflation higher last month despite
flat or falling costs for food and fuel, the government reported Thursday.
The hotter-than-expected inflation numbers come as the Federal Reserve is
poised to cut interest rates for the first time in a decade, due to fears of
a global economic slowdown and uncertainties fueled by trade conflicts.
The absence of inflation in recent years despite solid economic growth
removed pressure on the US central bank to keep raising the benchmark lending
rate, but the surprise jump in June might put in doubt any further Fed rate
cuts this year.
The Consumer Price Index, which tracks costs for household goods and
services, rose 0.1 percent compared to May, a notch above analyst forecasts,
the Labor Department reported.
Gasoline and fuel oil, electricity and piped natural gas all fell, but the
costs for shelter — rent and the equivalent expense for homeowners — surged
compared to May and have been rising steadily amid a tight housing market.
Meanwhile, used car prices spiked 1.6 percent and an uptick in medical
care costs also helped lift the index, according to the data. Household
furnishings were up 0.8 percent, the biggest jump in 28 years.
Excluding the volatile food and energy categories, the closely-watched
“core” CPI rose 0.3 percent compared to May — the largest one-month gain in
18 months.
But inflation remains tame over the past year, with the CPI slowing to 1.6
percent compared to June 2018, two tenths of a point lower than in May and
the second straight year-on-year decline. The core index is up 2.1 percent
compared to a year ago.
The Fed is due to hold its next policy meeting at the end of this month
and in congressional testimony Wednesday, Fed Chairman Jerome Powell said
many central bankers believed the case for a rate cut had “strengthened” in
recent weeks.
Analysts don’t expect the inflation data to change the Fed’s plan to cut
the key lending rate at the end of the month.
“This report won’t stop the Fed from easing on the 31st but it does
suggest that a 50 (basis point) cut would be risky,” Ian Shepherdson of
Pantheon Macroeconomics said in a client note.
BSS/AFP/HR/0922