A rebound in U.S. consumer prices in April signals inflation is stabilizing, supporting the case for Federal Reserve policy makers to raise interest rates, Labor Department figures showed Friday.
Highlights of CPI (April) Consumer-price index increased 0.2% (matching forecast) following 0.3% decline the prior month From a year earlier, prices were up 2.2% (forecast was 2.3%) after a 2.4% gain Excluding food and energy, core prices rose 0.1% from the prior month after falling 0.1%, and were up 1.9% from a year earlier, the least since October 2015
Businesses are regaining some pricing power as household spending grows and improving global demand helps to stabilize commodity costs, adding to signs that inflation is on track to meet or possibly exceed the Fed’s goal in coming months.
The central bank’s preferred gauge of inflation, a separate figure based on what consumers purchase, exceeded its 2 percent goal in February, though some Fed officials focus on the measure excluding food and energy, which remains below their target.
While core prices were lower than expected, “much of that weakness is likely to be transitory, in our view, particularly in the core services components,” Barclays Plc economist Blerina Uruci said in a research note. “In all, today’s data do not alter our view that the Federal Reserve will tighten policy in June.”