U.S. Consumer Inflation Moderates in 2019 -- Update
By Sarah Chaney
WASHINGTON -- U.S. consumer inflation wrapped up 2019 on a soft
note, complicating the outlook for Federal Reserve officials who
are watching for a meaningful pickup in prices.
The consumer-price index -- which measures the costs of everyday
goods and services from food to dental care -- increased 2.3% in
December from a year earlier, up from the 2018 increase of 1.9%.
That mainly appeared to reflect a sharp rise in gasoline prices
over the year. Prices excluding food and energy increased 2.3% in
December from a year earlier, a touch higher than in 2018 but down
from 2.4% in September.
Shelter prices, which were up 3.2% last year, matched the
previous two years. Apparel prices fell for the sixth straight year
in 2019. Prices for used vehicles were also down for the year.
"Inflation remains extremely well contained," said Michelle
Girard, chief U.S. economist at NatWest Markets. "If we continue to
see benign inflation, or even more worrisome, if inflation cools
from here in 2020, that could be a trigger for rate cuts."
The Federal Reserve cut interest rates three times last year, in
part to buffer the U.S. economy against slowing global growth. It
has signaled it will hold rates steady but intends to closely
monitor risks to the economy.
Muted inflation is a worry for the Fed because it could portend
slowing economic demand. Fed officials follow the consumer-price
index for clues about the trajectory of inflation. The central
bank's inflation target of 2% is tied to a separate measure, the
Commerce Department's price index for personal-consumption
expenditures. PCE inflation tends to be lower than CPI and has been
running below target. That reading will be released at the end of
Fed officials generally expect inflation will move up as labor
markets tighten, according to the most recent Fed meeting minutes.
So far, though, as some Fed officials noted, tighter labor markets
over the past couple of years haven't exerted strong upward
pressure on prices.
Economists cite several potential reasons behind muted price
gains, such as companies having less pricing power because of
globalization and consumers' growing tendency toward online
Write to Sarah Chaney at firstname.lastname@example.org
(END) Dow Jones Newswires
January 14, 2020 12:19 ET (17:19 GMT)
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