U.S. industrial output, housing starts picked up but consumer prices remained unchanged in July
U.S. consumer prices were unchanged in July but a rise in industrial output and home building suggested a pickup in economic activity that could allow the Federal Reserve to raise interest rates this year.
Tuesday’s economic reports came as influential New York Fed President William Dudley said the U.S. central bank could raise interest rates next month, citing a tightening labor market that he said was starting to spur faster wage growth.
“The strong housing starts and industrial output performance will bolster the Fed confidence that growth momentum has rebounded, potentially supporting the bias for a near-term hike,” said Millan Mulraine, deputy chief economist at TD Securities in New York. “Nevertheless, with inflation continuing to miss to the downside, the case for caution remains strong.”
July’s unchanged reading in the Consumer Price Index followed two straight monthly increases of 0.2 percent, while in the 12 months through July, the CPI rose 0.8 percent after increasing 1.0 percent in June.
The so-called core CPI, which strips out the volatile food and energy prices, edged up 0.1 percent in July after rising 0.2 percent in each of the previous three months. The year-on-year core CPI increased 2.2 percent in July after advancing 2.3 percent in June.
The Fed has a 2.0 percent inflation target and tracks an alternative inflation measure which has been stuck at 1.6 percent since March.
NY FED RAISES POSSIBILITY OF SEPT RATE RISE
The New York Fed’s Dudley told Fox Business television on Tuesday that “it’s possible” for the Fed to hike rates at its Sept. 20-21 policy meeting. Atlanta Fed President Dennis Lockhart also told reporters that he was not ruling out a move next month.
The Fed raised its benchmark overnight interest rate last December for the first time in nearly a decade.
