U.S. Inflation Jumps 1.8% in Past 12 Months, Consumer Prices Up 0.4% in November
US inflation over the past 12 months returned to positive territory for the first time since February, according to government data released Wednesday.
The latest Labor Department monthly report reveals that the Consumer Price Index, which measures inflation pressures at the consumer level, increased 1.8% from a year ago, and rose 0.4% in November.
The November reading was inline with most analysts’ expectations, and follows a 0.3% gain in October. The cost of living for Americans increased due to several categories, but was led by 4.1% jump in energy prices — the fourth straight monthly increase. Oil prices shot up 9%. Gasoline prices notably rose as well, soaring 6.4% in November after an increase of 1.6% in the month prior.
The so-called core consumer index that excludes the more volatile food and energy items was unchanged in November, marking the first month in ten without an increase. Analysts were expecting a 0.1% increase. The core CPI rose 0.2% in October. Read more
US Inflation Remains ‘Subdued’, Says Fed
The Federal Reserve ended its two-day meeting Wednesday, and as expected the Federal Open Market Committee (FOMC) did not raise interest rates. Further, in an exact parallel to its last statement, it noted that US inflation remained under control, stating:
With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.
September inflation data indicated that consumer prices declined 1.3% during the prior 12 months and that core annual inflation, which excludes volatile food and energy prices, rose just 1.5% — well within the Federal Reserve’s comfort range of between 1%-2%.
It appears its benchmark federal funds rate will remain virtually at zero for some time as the "economic activity is likely to remain weak for a time," according to the FOMC.
"The one consistent theme with all the Fed speakers is that they’re not going to raise rates any time soon," Drew Matus, an economist at Bank of America-Merrill Lynch, was quoted on NYTimes.com. "That is the one consistent theme that gets hammered home time and again."
In a unanimous vote, the FOMC decided to keep its key rate unchanged in a range of zero to 0.25 percent.
The released Fed statement follows in its entirety: Read more
Fed: Economy has ‘Picked Up’, US Inflation ‘Subdued’
The Federal Reserve ended its two-day meeting Wednesday, and the Federal Open Market Committee (FOMC) held interest rates steady near zero, as expected. The FOMC followed the meeting with a statement saying that "economic activity has picked up." It also indicated US inflation was under control, stating:
With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.
To provide support to mortgage lending and housing markets, the Fed noted that it expects to finish purchases of "$1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt" in a slowing pace until the first quarter of 2010.
August inflation data showed that consumer prices had decreased 1.5% during the prior 12 months and that core annual inflation, which excludes volatile food and energy prices, rose just 1.4%. That was the smallest year-over-year gain since February 2004, and well within the Federal Reserve’s traditional comfort zone of between 1%-2%. Read more
Annual US inflation Down 1.5%, August Consumer Prices Higher on Energy Costs
U.S. consumer prices rose slightly in August but the key measure of inflation remained lower over the past 12 months, the government reported Wednesday morning.
Led by a 9.1% increase in gasoline prices, the Consumer Price Index rose 0.4% in August and followed no change in July, according to the Labor Department. The core CPI, which excludes volatile energy and food prices, increased 0.1% in August, the same level as July.
"For inflation to be a concern, we’d have to see core rates rising consistently above 0.2% each month and wages start to rise," PNC analyst Robert Dye was quoted on CNNMoney. "The labor markets are far from healed enough for that to happen."
The latest data also helps to ease concerns of rising inflation due to recent government spending and the Federal Reserve monetary policy of injecting cash into the US economy in a continuing effort to stimulate a recovery. Read more
Annual inflation at -0.7%, sharpest drop in consumer prices since 1955
Despite a flat reading for U.S. consumer prices in April, the annual inflation rate fell with the sharpest decline in 54 years, the government reported on Friday.
The Labor Department said the Consumer Price Index (CPI) remained unchanged in April after decreasing 0.1% in March. However, a reduction in the cost of energy over the past 12 months helped drive the annual rate 0.7% lower, marking the second straight monthly dip and the biggest decline since August 1955.
"The era of U.S. consumer price deflation is now upon us as the ongoing economic recession and deteriorating labor market conditions continue to weaken the bargaining power of retailers and laborers alike, thereby quenching the once raging inflationary flames," Millan Mulraine, economics strategist for TD Securities, was quoted on Forbes.com
There is a debate raging between economists on whether a threat to the approaching economy is rising inflation or spiraling, out of control falling prices, known as deflation. Read more
Fed to buy $1 trillion in securities, expects inflation to remain subdued
With expectations for inflation to remain under control and in a move to combat the recession, the Federal Reserve on Wednesday said it would pump more than $1 trillion into the economy.
In a statement following the conclusion of its two-day policy meeting, the Federal Open Market Committee (FOMC) said it would:
- Increase its purchases of mortgage-backed securities by $750 billion, on top of the already announced $500 billion
- Buy $300 billion of long-term Treasurys over the next six months
The Fed hopes the first measure will pull down mortgage rates and the second will help ease the credit crunch. Immediately following the news, U.S. stocks rallied, bond prices surged and gold prices reversed direction. Read more
Long-term inflation target of 1.7% to 2% set by Fed
The U.S. economy has weakened further and a gradual recovery in economic activity isn’t expected until later this year, Fed policy makers agreed, according to minutes released Wednesday and taken during the closed-door Federal Open Market Committee (FOMC) meeting Jan. 27-28.
The committee also noted their outlook had significant "downside risks," and provided a set of informal long-term economic projections, including that of inflation at 1.7% to 2%. After the meeting, the FOMC held the federal funds rate to a range of between 0 to 0.25%, as it first set in December, and concluded low interest rate levels would need to be kept for some time.
The released minutes make it clearer, however, how some members see the potential for excessive disinflation in 2009, or a deflation risk as St. Louis Fed’s Bullard addressed in a speech Tuesday. Deflation is a persistent decrease in general prices, or the opposite of inflation. Read more
Deflation a key risk in 2009, argues St. Louis Fed President James Bullard
Further disinflation and a possibly "deflationary trap" is a key "near-term risk" for 2009, said James Bullard, president of the St. Louis Federal Reserve Bank, on Tuesday during a speech in New York. Bullard warned,
"Expectations of deflation for the next five years may feed into real interest rates, driving real rates higher just at the time monetary policy would like to move them lower."
Deflation is a persistent decrease in general prices, or the opposite of inflation. Falling prices may seem like good news for consumers, but only to a certain point. If prices mark sustained deflationary levels that strike below the cost to produce goods and services, further economic turmoil can ensue with production cuts, payroll reductions and deepening unemployment. Deflation can intensify debt by making it more expensive, cripple equity and widen home foreclosures.
Bullard addressed the New York Association For Business Economics where he said the recession would likely continue at least to the first half of 2009, and that there is a risk for sustained disinflation and a possible deflationary cycle similar to what the Japanese experienced after 1990. Read more
Fed December minutes paint darker economic picture, lower inflation
Minutes taken during the closed-door Federal Reserve December 15-16 meeting paint a darker than expected picture for the economy, with further contraction and rising unemployment on the horizon.
At the conclusion of its historic meeting, the Federal Open Market Committee (FOMC) slashed rates to a record low of between zero and 0.25%. The minutes, which provide much more detail and are always released several weeks after the official meeting, cite specific expectations reaching into 2009 and 2010. Read more
Fed slashes rates to record low, zero to 0.25%
The Federal Reserve aggressively lowered its benchmark federal funds rate to a range of between zero percent and 0.25%, and said it would "employ all available tools to promote the resumption of sustainable economic growth."
Slashing the overnight lending rate by such a degree was an unexpected Fed move. Most everyone had expected a 0.5% cut from its prior 1%. The rate is now at its lowest level since the government started keeping records in 1954.
"It’s a highly unorthodox and creative step," Michael Woolfolk, senior currency strategist, at the Bank of New York-Mellon in New York told Reuters. "We think it’s the best possible move for the U.S. consumer and for the financial market."
The announcement was made by the Federal Open Market Committee (FOMC), who released the following statement: Read more