As American consumers buy more, it could push prices closer to the Fed’s target. Consumer prices rose 0.9 percent in November from a year earlier, according to the personal consumption expenditures deflator, an inflation measure watched by the Fed. The central bank aims for inflation of about 2 percent.
Slow price increases may cause Fed officials to remain cautious as the central bank tapers its unprecedented asset purchases. The bank’s $85 billion monthly buying pace slackened to $75 billion this month.
Fed’s Evans
Federal Reserve Bank of Chicago President Charles Evans, who has supported record stimulus, said Jan. 15 that the central bank’s slowdown should be seen as a shift in emphasis toward keeping interest rates near zero for a longer time -- partly because of still-low price pressures.
“We will not prematurely reduce accommodation in an economy with elevated unemployment and very low inflation pressures,” Evans said. The U.S. added 74,000 jobs last month, fewer than the most pessimistic projection in a Bloomberg survey, a Labor Department report showed Jan. 10.
The CPI is the broadest of three price gauges from the Labor Department because it includes goods and services. About 60 percent of the index covers prices consumers pay for services from medical visits to airline fares, movie tickets and rents.
Wholesale prices climbed 0.4 in December, according to Labor Department data released last week. December import prices were unchanged from November, when they fell more than initially reported, data showed Jan. 14.