U.S. consumer prices rose by the most in 10 months in February as the cost of gasoline spiked, a government report showed on Friday, but there was little sign that underlying inflation pressures were building up.
The Labor Department said its consumer price index increased 0.4 per cent after advancing 0.2 per cent in January. That was in line with economists’ expectations. Gasoline accounted for more than 80 per cent of the rise in consumer prices last month, the department said.
Outside the volatile food and energy category, inflation pressures were generally contained. Core CPI edged up 0.1 per cent after gaining 0.2 per cent in January. The February increase was below economists’ expectations in a Reuters poll for a 0.2 per cent rise.
The Federal Reserve said on Tuesday that the recent spike in energy costs would likely push up inflation temporarily. Over the long-term, inflation was likely to run at or below the its 2 per cent target, it said.
While the U.S. central bank reiterated its expectation that overnight interest rates would remain near zero until at least through late 2014, it offered no clues on whether it would launch a third round of bond buying or quantitative easing, to keep borrowing costs low to stimulate the recovery.
Last month, overall inflation was pushed up by gasoline prices, which soared 6 per cent, the largest increase since December 2010, after rising 0.9 per cent in January.
Although surging gasoline prices are a strain on consumers, they have so far not caused a sharp pull back in spending, thanks to a strengthening jobs market.
Food prices were flat last month after rising 0.2 per cent in January. Food prices were the weakest since July 2010.
Overall consumer prices rose 2.9 per cent year-on-year after increasing by the same margin in January.
Core consumer prices were last month restrained by apparel prices, which fell 0.9 per cent – the most since July 2006 – after rising 0.9 per cent in January. There were also declines in the prices of tobacco, airline tickets and used cars and trucks.
But new motor vehicle prices rose 0.6 per cent after being flat in January. While housing costs held up, owners’ equivalent rent rose only 0.1 per cent last month after increasing 0.2 per cent the prior month.
In the 12 months to February, core CPI increased 2.2 per cent after rising 2.3 per cent in January. This measure has rebounded from a record low of 0.6 per cent in October and the Fed would like to see that closer to 2 per cent.
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