U.S. consumer prices rose by less than forecast in April as costs for automobiles and airfares declined, reducing chances that inflation will run significantly above the Federal Reserve’s target in coming months.
The consumer-price index advanced 0.2 percent from the prior month after a March decline of 0.1 percent, a Labor Department report showed Thursday, compared with the Bloomberg survey median of a 0.3 percent gain. Excluding food and energy, the core gauge was up a below-forecast 0.1 percent from March -- the least since November -- and 2.1 percent from a year earlier, compared with projections for 2.2 percent.
Prices for used cars had the biggest monthly drop since 2009 and airfares fell the most in four years. The dollar fell after the report suggested inflation isn’t flaring up in a way that would be troublesome for policy makers, despite higher freight costs, a 17-year low in the unemployment rate and tariffs that are burdening businesses. The Fed is projected to raise interest rates in June for the second time this year, though officials were divided in March over whether three or four total hikes in 2018 were warranted.
“This is a pretty soft print with a number of large declines,” said Omair Sharif, a senior U.S. economist at Societe Generale. “There’s no broad-based gain in inflation. It argues for the Fed sticking with the three-rate-hike type of plan.”
While rising gasoline prices are pinching Americans’ wallets, fuel is providing only a modest boost to the broad CPI, which rose 2.5 percent in April from a year earlier. Seasonally adjusted gas prices rose 3 percent in April from the previous month after a 4.9 percent drop in March, according to the report.
The core CPI reading brought the three-month annualized gain to 1.8 percent, the lowest since July, after 2.9 percent.
The shelter category rose 0.3 percent from the prior month after a 0.4 percent gain. Owners-equivalent rent, one of the categories designed to track rental prices, advanced 0.3 percent. Hotel and motel rates, which had posted an outsize gain in March, rose 0.8 percent in April.
Commerce Department figures released April 30 showed the Fed’s separate preferred gauge of inflation met policy makers’ 2 percent target in March for the first time in a year. The preferred core index, seen by officials as a better gauge of underlying inflation trends, was up 1.9 percent from March 2017.
Wages, which feed into inflation pressures, are growing only moderately even as the job market is tight. A separate report released Thursday by the Labor Department showed average hourly earnings adjusted for inflation rose 0.2 percent from April 2017.
Other Details
-Energy prices rose 1.4 percent from previous month after 2.8 percent decline; food costs advanced 0.3 percent after 0.1 percent gain