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US Inflation Slips Further Away from Fed Target

H.S. Borji
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US Inflation Slips Further Away from Fed Target

Consumer prices in the US were little changed in February, as falling gasoline prices offset an increase in the cost of food to keep inflation subdued.

Consumer inflation rose 0.1 percent in January, following a similar hike the previous month, the Labor Department reported today in Washington. Compared to a year ago, consumer prices rose 1.1 percent, slowing from a 1.6 percent advance in January. The so-called core measure, which excludes volatile products such as food and energy, rose 0.1 percent for the third consecutive month. Compared to a year ago, core prices rose 1.6 percent.

Declining energy costs offset a sharp advance in food prices, official data showed. The price of energy declined 0.5 percent in February and 2.5 percent over the previous 12 month period. Overall energy prices declined in spite of a strong surge in fuel oil.

Food prices advanced at the fastest pace since September 2011. The 0.4 percent monthly gain was responsible for more than half the advance in consumer prices last month. Compared to the previous 12 months, food prices rose 1.4 percent, official data showed.

Consumer inflation is trending well below the Federal Reserve’s 2 percent target. While persistently low inflation gives the Fed the impetus to maintain record-low interest rates, today’s soft reading isn’t expected to dissuade the central bank from reigning in record stimulus. The Fed, which kicked off its two-day policy meetings in Washington, has already pared asset purchases by $20 billion.

Fed officials have said the central bank will likely hold interest rates at record lows well after the time the unemployment rate falls below 6.5 percent, especially if inflation continues to trend below the 2 percent target.

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