U.S. CPI edged up 0.1% in September as gas prices slipped 1.0%
(Reuters) – U.S. consumer prices rose marginally in September, painting a weak inflation picture that should give the Federal Reserve ample room to keep interest rates low for a while.
The Labor Department said on Wednesday its Consumer Price Index edged up 0.1 percent last month as a rise in food and shelter costs offset a decline in energy prices.
“The ongoing inflation weakness will give the Fed leeway to take a restrained approach to tightening monetary conditions,” said Robert Hughes, senior research fellow at the American Institute for Economic Research in Great Barrington, Massachusetts.
The CPI had dropped 0.2 percent in August and economists had expected a flat reading in September. In the 12 months through September, the CPI rose 1.7 percent after a similar gain in August. The Fed targets 2 percent inflation and tracks an index that is running even lower than the CPI.
Inflation has waned in recent months after quickening in the second quarter, with a stronger dollar and slower economic growth in China and the euro zone dampening import prices. Sluggish wage growth has also helped keep a lid on prices.
The soft inflation backdrop and a recent global equities market sell-off has led investors to push back their expectations for when the U.S. central bank will raise interest rates from near zero to late next year. Just a few weeks ago, they had looked for a rate hike in July.
Fed officials meet next week and their statement at the end of the two-day meeting will be watched for changes in their assessment of the inflation environment.
Economists had expected consumer prices to hold steady last month, and U.S. Treasury debt prices slipped after the data was released, while the dollar rose against a basket of currencies. U.S. stocks were trading higher, boosted by strong earnings from Yahoo Inc (YHOO.O), Broadcom (BRCM.O) and Dow Chemical (DOW.N).
