U.S. consumer prices were up slightly in April, according to a story on the trucking industry news site The Trucker. This increase means a third straight month of rising prices, further suggesting the economy is improving and that the Federal Reserve may consider raising interest rates later on in 2015.
The article states that consumer prices “edged up” 0.1 percent from the previous month, when prices had already raised a modest 0.2 percent, citing Labor Department data. Overall gains were held back by a 1.3 percent drop in energy costs, which offset the largest single-month leap in medical care in 8 years.
Core inflation, including volatile food and energy, raised 0.3 percent, which is the biggest gain in 15 months. That figure was boosted by a 0.7 percent rise in medical care, which reflects a surge in hospital costs.
BMO Capital Markets Senior Economist Jennifer Lee said that inflation overall and core prices have led to a modest acceleration over the past 6 months.
“This suggests that although inflation remains very tame, economic growth, sporadic as it is … is helping prices stabilize instead of fall,” Lee said in a letter to clients.
Pressure from inflation has been held in check since the recession, despite the strong gains in employment in the past year. That inflation containment has allowed the Federal Reserve the wiggle room it needed to keep interest rates at record lows for the past 6 years in order to help stem economic recovery.
“The Fed can’t wait forever before beginning to raise interest rates from near zero,” the article quoted Capital Economics Chief U.S. Economist Paul Ashworth in a research note that predicted an interest rate hike in September.
It is important to note that consumer prices are down 0.2 percent from the same time a year ago, which reflects a nearly 20 percent drop in energy prices. But excluding energy and food, prices have risen 1.8 percent from 2014.
Seasonally-adjusted gasoline prices fell 1.7 percent in April after consecutive increases over the past two months. The average price of a gallon of gasoline nationwide stands as of press time at $2.73 according to the AAA Daily Fuel Gauge. That price reflects a 27 cent increase from the previous month, but still 91 cents below the cost last year.
The price report for April also showed gains in many areas outside of food and energy. The price of used cars rose 0.6 percent, while new car prices increased by a more modest 0.1 percent. Home furnishings costs increased by 0.5 percent, which reflects the largest gain since September 2008. Clothing prices fell 0.3 percent, which is the first decline for apparel since December. Inflation by a price gauge that is preferred by the Federal Reserve has been below the Fed’s 2-percent target for almost 3 years now, which The Fed aims to keep prices rising at this same level. It views these gains as indicative of achieving its goal of price stability. Anything below that target raises the danger or deflation, where prices fall sharply enough to disrupt economic growth.
The Federal Reserve has kept interest rates at nearly zero, making an effort to stimulate additional economic growth, and re-establish the millions of jobs lost during the 2007-2009 recession. Federal Reserve officials have noted they want to be “reasonably confident” that inflation is headed toward their target goal of 2 percent before raising rates. The 2 percent number would signal a stronger economy and would leave the Federal Reserve at a point of confidence.
With employment gains over the past year, and economic growth expected to continue to rebound after this winter’s slowdown, a great number of economists believe the Fed will begin raising rates later on in 2015.
This news is a continued signal that the country is moving again toward strong economic health, and that we are slowly moving out of the recession.
To read more about this story at the trucking industry news site The Trucker, read the whole story at this link. There are of course many other outlets that cover economic news, and you can also explore this topic at those outlets as well.