US inflation rose in February on higher fuel and clothing prices, government data showed today, pointing to some pricing power in the recession-hit economy and easing fears of deflation for now.
The Labor Department said its closely watched Consumer Price Index rose 0.4 per cent, the biggest monthly gain since last July, after increasing 0.3 per cent in January.
It said about two-thirds of the rise in the headline figure was from the jump in gasoline prices.
“The one-time shock from lower commodity prices and stronger dollar late last year has faded. We haven't slipped into a worrisome deflation situation,” said Zach Pandl, an economist at Nomura Securities International in New York.
At the same time, he said, the data did not point to a resurgence in inflation.
US equity index futures held their losses, while the US dollar extended gains versus the euro after the data. The data came ahead of the Federal Reserve's announcement of its decision on monetary policy later today.
The Fed is expected to leave the target for its benchmark overnight funds rates unchanged at zero-0.25 per cent.
But the statement accompanying the decision will be watched for indications on whether the Fed will start buying Treasuries to damp down interest rates and help revive an economy in recession since December 2007.
Core prices, which exclude food and energy items, increased 0.2 per cent in February after rising by the same margin the prior month.
On a year-over-year basis, consumer prices were up 0.2 per cent after being flat in January. Energy prices surged 3.3 per cent in February, also the largest monthly increase since July last year, while gasoline was up 8.3 per cent.
However, compared to the same period last year, energy prices were down 18.5 per cent, the department said.
Clothing prices jumped 1.3 per cent, the biggest rise since a 1.5 per cent gain in March 1990. New vehicle prices rose 0.8 per cent, the largest advance since November 2004.
Reuters