WASHINGTON (REUTERS) – American inflation is in eight months in December with the most increased consumer expenditure on goods and services, which suggests that the Federal Reserve would probably not be in a hurry to resume the interest rates.
While the report of the Commerce Department on Friday showed a modest profit in prizes with exclusive volatile food and energy components on a monthly basis, the annual increase in so-called core inflation has not been delayed since October. The disinflation output came in the fourth quarter.
The US central bank held the rates for the first time on Wednesday since the launch of its policy renewal cycle in September. The policy statement in the decision did not include the reference to inflation with “progress made” in the direction of the target of 2% of the FED. The inflation views are cloudy by uncertainty about the economic impact of the tax, trade and immigration policy of President Donald Trump.
“The prognosis of the FED is for a slower pace of monetary relaxation, because the economy is doing well and the prices only slowly return to the target in an environment of great uncertainty,” said Carl Weinberg, chief economy at high frequency economy. “This data supports that strategy.”
The price index of the personal consumption outsents (PCE) increased by 0.3% last month, the biggest increase since last April, after a non -re -revised profit of 0.1% in November, said the Bureau of Economic Analysis of the Commerce Department.
The increase was in accordance with the expectations of economists. The goods prices rose 0.2%, the first profit in five months, lifted due to higher costs for motor vehicles and parts, as well as gasoline and other energy goods, which jumped with 4.2%.
Prices of furniture and sustainable household equipment fell as they did for recreational goods and vehicles. The costs of services rose by 0.3% in the midst of the profit in transport, recreation and housing and utilities.
In the 12 months to December, the PCE inflation continued 2.6%. That was the biggest profit in seven months and followed an increase of 2.4% in November.
The data was included in the Breat Gross -inland Product Report for the fourth quarter that was published on Thursday. The FED follows the PCE price measures for monetary policy. It has reduced its benchmark at night with 100 basic points to the reach of 4.25% -4.50% since September.
This year, the Central Bank predicted only two reductions, against the four that it had projected in September, in the midst of caution on the plans of the new Trump administration for tax reductions, broad rates for input and an immigration capacity, which economists regard as inflatory .
No rate reduction is expected before June. The PCE price index was eradicated by the PCE price index by 0.2% last month after a non -re -revised increase of 0.1% in November. In the 12 months to December, core inflation continued 2.8%, with the same margin for three consecutive months.
Some economists emphasized the light monthly profit in the core inflation and a separate report from the Bureau or Labor Statistics of the labor department that demonstrated a marginal rise in labor costs in the fourth quarter as signs that the disinflator trend remained intact. Core inflation rose by a percentage of 2.2% in the three months to December.
“That will be welcome news at the Fed, although as transferred to the recent Fed Speak, the Commission will be patient when considering further interest rate lets, and we still see them on hold of the middle of the year,” said Abiel Reinhart, an economist at JPMorgan.
This week FED chairman Jerome Powell indicated that policy makers saw the inflation of 12 months “because that assumes the seasonal issues that can exist.”
Stocks on Wall Street were higher. The dollar went against a basket with currency. The American treasury delivers Rose.
Labor costs are increasing
The Employment Cost Index (ECI), the widest measure of labor costs, won 0.9% in the fourth quarter after rising 0.8% in the third quarter. The labor costs rose 3.8% in the 12 months to December, the slowest since the third quarter of 2021, after an increase of 3.9% in the year to September.
The ECI is considered by policymakers as one of the better measures of the labor market and a predictor of core inflation because it adapts to changes in composition and work quality.
“The ECI is still consistent with price stability As long as labor productivity continues to grow by around 2% on an annual basis,” says Sal Guatieri, a senior economist at BMO Capital Markets.
“Deportations can, however, add some pressure.”
Fear of rates have sent consumers to hit goods to prevent higher prices, which made consumer expenditures in force, which achieved its fastest growth rate in almost two years in the fourth quarter, so that the economic expansion was terminated.
Consumer expenditures, which are good for more than two -thirds of US economic activity, rose by 0.7% in December after an upward revised increase of 0.6% in November. The expenditure would have won 0.4% earlier in November.
Goods issues rose by 0.9%, powered by cars, food, as well as gasoline and other energy products. Expenditure on services rose 0.6% amidst large profit in homes and utilities, transport, health care and other services.
Economists expect that preventive buying continued in January.
When adapted for inflation, consumer spending increased by 0.4%, so that the economy was set up on a higher growth process on the way to the first quarter.
The personal income rose by 0.4% after winning 0.3% in November. With expenses that surpassed income, the savings percentage fell to a low two years of 3.8% of 4.1% in November.
Some economists argued that the low savings rate was not conducive to further profit in consumer spending after the rate -related purchasing frenzy. Others were not worried.
“We expect that consumer spending will continue to be strengthened by strong balances in general, including record amounts of housing,” said Nancy Vanden Hout, leads the American economist at Oxford Economics.
(Reporting by Lucia Mutikani; adaptation by Chizu Nomiyama and Paul Simao)
