U.S. consumer prices rose less than expected in September, held back by a slower increase in the cost of rent and falling energy prices, as underlying inflation pressures appeared to cool slightly.
The modest price increases come despite a U.S. labour market that looks robust by most measures. A separate report on Thursday showed an unexpected but moderate rise in the number of Americans filing for unemployment benefits last week.
With the readings only slightly below what analysts expected, the inflation report is not likely to impact expectations the Federal Reserve will raise interest rates at its December policy meeting.
“Overall, these data support our baseline view of a gradual pickup in inflationary pressures,” Oxford Economics said in a note to clients.
The Consumer Price Index increased 0.1 per cent last month after rising 0.2 per cent in August, the Labor Department said. In the 12 months through September, the CPI increased 2.3 per cent, slowing from August’s 2.7 per cent advance.
Excluding the volatile food and energy components, the CPI edged up 0.1 per cent for the second straight month. The so-called core index had increased 0.2 per cent in May, June and July.
In the 12 months through September, the core CPI increased 2.2 per cent. Economists polled by Reuters had forecast both overall and core CPI climbing 0.2 per cent in September.
U.S. Treasury yields extended their fall as the data added to the view that a sell-off in U.S. and global stocks may have partly paused expectations of a more aggressive pace of Fed rate hikes. The dollar weakened to a nearly two-week low against a basket of currencies.
The Fed tracks a different inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, for monetary policy. The core PCE price index rose 2.0 per cent in the 12 months through August, holding at the Fed’s 2 per cent target for the fourth straight month.
The U.S. central bank has raised rates three times this year, and U.S. President Donald Trump on Thursday called the rate increases a “ridiculous” policy. It was the second consecutive day that Trump had criticized the Fed.
Last month, gasoline prices slipped 0.2 per cent after surging 3.0 per cent in August. Food prices were flat overall and prices for food consumed at home fell 0.1 per cent.
Owners’ equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, rose 0.2 per cent in September after rising 0.3 per cent in August. Rental prices for primary residences rose 0.2 per cent, down from a 0.4 per cent increase in August.
Separately, the Labor Department said initial claims for state unemployment benefits increased 7,000 to a seasonally adjusted 214,000 for the week ended Oct. 6. While analysts had expected a slight decline, the reading still remained near a 49-year low.
The four-week moving average of initial claims, considered a better measure of labour market trends as it irons out week-to-week volatility, rose 2,500 to 209,500 last week.
The labour market is viewed as being near or at full employment, which many economists believe is helping U.S. wages grow a little more quickly and fuelling expectations of future rate increases.