Consumer Prices Rise; Inflation Still Tame
U.S. consumer prices posted their first gain in four months during January as costs for food and energy began to rise, according to a Labor Department report Wednesday that showed inflation remains tame.
The consumer price index, the most widely used gauge of inflation, rose 0.2% last month, slightly below Wall Street economists’ forecasts for a 0.3% increase.
Although the report indicated a gradually recovering economy could begin nudging prices higher, analysts said any inflation risk was well into the future and there was little or no prospect of policymakers raising interest rates soon.
Still, it was the first increase in consumer prices since a 0.4% rise in September. Prices declined 0.3% in October and 0.1% in both November and December. Hopes have grown that the economy is on the verge of recovery from a recession that set in last March, and typically that is accompanied by higher prices.
“I think the economy will grow slowly enough, unemployment will remain high enough and productivity growth will be vigorous enough that inflation won’t raise its ugly head anytime soon,” said economist Bill Cheney of John Hancock Financial Services in Boston.
That means U.S. interest rates, now at 40-year lows after last year’s rate-slashing campaign by the Federal Reserve, could stay at current levels at least until mid-year, analysts say.
Financial markets showed scant reaction to the latest data, which fit with other recent signs that economic activity was stabilizing but did not imply a sharp resurgence in growth. U.S. bond prices firmed on the prices report--an indication traders did not see any likelihood that interest rates would go up in the near future.
Energy costs, which had tumbled during the final three months of 2001, rose 0.9% in January, while food prices were up 0.3% after a flat December reading. Gasoline prices climbed 2.7% last month, but that followed big drops of 5.8% in December and 10.5% in November.
Excluding food and energy, the so-called core rate of prices was ahead 0.2% last month after a 0.1% rise in December.
