Surging gasoline costs drive up US consumer prices in May

Marco Green
June 14, 2018

FOX Business' Trish Regan says comments made by liberal comedian Bill Maher rooting against the USA economy is going against the collective success of all citizens.

At the same time, several Fed officials have indicated that a modest overshoot of the inflation goal would not necessarily warrant faster interest-rate hikes, after years of below-target price gains.

The consumer price index rose 0.2 percent from the previous month and 2.8 percent from a year earlier, matching estimates, a Labor Department report showed Tuesday.

Sharp increases in the prices for gasoline, fuel oil, shelter and medical care helped send a key measure of annual U.S. consumer inflation to a six-year high in May, according to new data Tuesday.

The Fed's preferred gauge of inflation - a separate consumption-based figure from the Commerce Department - came in at the central bank's 2 percent goal during March and April, and the figure tends to run slightly below the Labor Department's CPI. In the 12 months through May, the CPI accelerated 2.8 percent, the biggest advance since February 2012, after rising 2.5 percent in April.

The pickup in headline inflation partly reflects gains in fuel prices, though the annual gain in the core measure - seen by officials as a better gauge of underlying inflation trends - was the most since February 2017.

With the United States inflation approaching 3% level, the Federal Reserve is likely to continue its gradual path of monetary policy normalization with two more hikes this year after it hikes tomorrow. With the inflation gauge being stripped of food and energy prices, the core inflation measure rose 2.2% over the year in May, meeting the Federal Reserve's implicit inflation target that justifies its move on interest rates as early as tomorrow. Economists are divided on whether policymakers will signal one or two more rate hikes in their statement accompanying the rate decision. Commerce Department figures released 31 May showed the Fed's preferred gauge of core prices was up 1.8% in April from a year earlier. The shelter index rose by 0.3% due to a rise in rental prices, while the gasoline index rose by 1.7% - enough to offset declines in other energy component indexes. Food prices were unchanged in May after rising 0.3 percent in the prior month. Food consumed at home fell 0.2 per cent.

Owners' equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, rose 0.3 percent last month after increasing 0.3 percent in April.

Healthcare costs gained 0.2 percent last month, with prices for prescription drugs jumping 1.4 percent and the cost of hospital visits rising 0.5 percent.

Prices for used cars and trucks fell 0.9 percent after tumbling 1.6 percent in April.

Other reports by Click Lancashire

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