|09-17-2014, 09:05 PM||#1|
U.S. Consumer Inflation Declines for The First Time in Since April 2013
U.S. consumer prices declined for the first time since April 2013 in August, signaling subdued underlying inflation pressures which could make the Federal Reserve think twice before rushing to raise interest rates.
The U.S. Labor Department said its consumer price index fell 0.2% last month as a broad decrease in energy prices overshadowed increases in food and shelter costs.
August marked the first drop since April last year and followed a 0.1% gain in July. Analysts by Bloomberg expected prices to stagnate in August.
For the past 12 months, the CPI increased 1.7% after rising 2.0% in July.
Energy prices fell for a second straight month, with gasoline prices plunging 4.1 percent after declining 0.3 percent the prior month. Food prices rose 0.2 percent after advancing 0.4 percent in July as the effects of a drought in California linger.
Excluding food and energy prices, the so-called core CPI was unchanged in August after rising 0.1% in July. This was the first time since October 2010 the core gauge did not increase. On a yearly basis, core CPI increased 1.7%, slowing down from a 1.9% increase in July.
The core CPI was damped by a second straight month of sharp declines in airline fares. Falling apparel and used car prices also weighed. Recreation prices recorded their largest drop since December 2009, while household furnishings declined.
The Fed targets 2 percent inflation and it tracks an index that is running even lower than the CPI. The CPI report was released ahead of the conclusion of the U.S. central bank`s two-day policy meeting. The Fed is scheduled to release its policy statement at 2:00 p.m. ET, which will be watched for signals on the timing of the first interest rate increase.
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