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US consumer prices drop for the first time in seven months.

US consumer prices fell in August as petrol prices dropped and a strong dollar curbed the cost of goods, the US Department of Labor has said.

Photo of the Remarkables mountain range in Queenstown, New Zealand.

The Consumer Price Index (CPI) slipped 0.1% last month, the first decline since January.

But in the 12 months to August, the CPI rose 0.2% after a similar gain in July.

Federal Reserve officials who are meeting to discuss interest rates, have previously said they view low energy costs and a rising dollar as temporary.

A decision is due on Thursday.

Last month they indicated that seven years of zero interest rates would end, but it is uncertain whether a rise will happen this month or early next year.

Whenever the rise occurs, the Fed has said it will be gradual.

Michael Montgomery, US Economist at IHS Global Insight said he predicted there wouldn’t be a rise in September.

“This CPI report will not change minds about policy but all the other factors driving the economy are putting scant upward pressure on prices and the major driver (energy) is not under control.”

The so-called core CPI, which strips out volatile fuel and food costs, rose 0.1% for a second month.

The relatively robust nature of the US economy has been supportive of a rate rise but that is against a background of weak commodity prices, uneasy financial markets and the slowing down of China and emerging markets.

David Folkert-Landau, Deutsche Bank’s research chief said there was a “compelling case” for raising interest rates given the improved labour market, and the temporary nature of low energy prices.

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