U.S. Consumer Prices Rise for First Time Since October

        WASHINGTON-U.S. consumer prices resumed their modest climb last month after decreasing most of the winter, but underlying inflation remains weak amid listless economic growth.
        The consumer-price index, reflecting what Americans pay for everything from groceries to medical care, rose a seasonally adjusted 0.2% in February from a month earlier, the Labor Department said Tuesday. That marked the first rise since October and the biggest increase since June.
        Excluding volatile food and energy components, core prices also climbed 0.2%.
        Economists surveyed by The Wall Street Journal expected a 0.2% rise in overall prices and a 0.1% increase in core prices.
        Over the past year, overall prices are flat while core prices have risen 1.7%. The overall gauge had weakened since last summer due mainly to a slide in oil prices--linked to a global buildup in supplies--that has since eased. But consumer prices have remained stubbornly low throughout most of the recovery, reflecting weak demand in the U.S. and abroad.
        Low inflation is weighing on the Fed as it considers raising short-term interest rates, which the central bank has kept near zero since the recession to stoke economic growth.
        The Fed prefers a separate measure-the Commerce Department's price index for personal consumption expenditures-as it targets annual inflation of 2% to determine that prices are stable and the economy is growing healthily. That index has run below the central bank's target since spring 2012.
        The Fed said after its latest policy meeting this month that it would raise rates when it sees further improvement in the labor market and it becomes confident inflation is moving toward 2%. Most analysts believe the Fed will start raising rates later this year.
        The central bank said it expects inflation to remain low in the near term but to gradually pick up.
        "The Committee expects inflation to rise gradually toward 2% over the medium term as the labor market improves further and the transitory effects of energy price declines and other factors dissipate," the Fed said in its statement. It projects the PCE price index to hit 0.6% to 0.8% by the end of this year and to reach 1.7% to 1.9% by the end of 2016.
        Tuesday's report showed energy prices rose 1% from January, ending seven consecutive monthly declines. Food prices increased 0.2%.
        The climb in core prices was driven largely by higher housing costs. Shelter expenses--reflecting the cost of housing, including rent--climbed 0.2%, accounting for about two-thirds of the overall rise in core prices.
        Prices for medical-care commodities increased 0.7% due largely to rising prices for prescription drugs. But prices for medical-care services dropped for the first time since 1975.
        A separate report Tuesday showed Americans' inflation-adjusted wages declined in February. Real average hourly earnings fell 0.1% from January, as the rise in overall prices offset a 0.1% increase in average hourly pay. Weekly real earnings fell 0.1%, reflecting the decline in inflation-adjusted hourly pay and no increase in workers' hours.
        The Labor Department's consumer-price index report can be found at http://www.bls.gov/news.release/pdf/cpi.pdf.
        Write to Josh Mitchell at joshua.mitchell@wsj.com and Jeffrey Sparshott at jeffrey.sparshott@wsj.com.
        Subscribe to WSJ: http://online.wsj.com?mod=djnwires
        (END) Dow Jones Newswires

        March 24, 2015 08:40 ET (12:40 GMT)

By Josh Mitchell 

        U.S. consumer prices climbed for the first time in four months in February, potentially reassuring the Federal Reserve that the economic recovery is on track as it considers raising interest rates.
        The consumer-price index, reflecting what Americans pay for everything from groceries to housing, rose 0.2% in February from the prior month, the Labor Department said Tuesday. That marked the first increase since October and the biggest rise since June.
        Core prices, which exclude volatile food and energy costs, also rose 0.2% last month after increasing at the same pace in January.
        Economists surveyed by The Wall Street Journal had expected a 0.2% rise in overall prices and a 0.1% increase in core prices.
        Over the past year, overall consumer prices are flat while core prices have increased 1.7%. Those figures indicate inflation in the U.S. is still subdued, reflecting sluggish demand for goods and services and flagging growth abroad. Many economists expect prices to remain weak in coming months due to the strong dollar--which generally lowers the prices of imports--and low energy prices.
        But last month's modest rise in overall prices--after a slide in oil prices led to three months of declines--could offer encouragement for the Fed as it considers raising short-term interest rates later this year.
        The central bank has kept rates near zero since the recession to spur hiring, investment and spending.
        The central bank said after its latest policy meeting last week that it would consider raising rates if the labor market continues to improve and if signs point to inflation picking up to its target of 2%, as measured by a separate Commerce Department gauge.
        "For the Fed, a return to positive territory for broad price measures will be a welcome development," analyst Dan Greenhaus of BTIG said in a note to clients. "We feel confident the Fed will go ahead and tighten policy this year, September specifically."
        The Fed prefers a separate measure--the Commerce Department's price index for personal consumption expenditures--as it targets annual inflation of 2% to determine that prices are stable and the economy is growing healthily. That index has run below the central bank's target since spring 2012.
        The central bank said it expects inflation to remain low in the near term but to gradually pick up.
        "The Committee expects inflation to rise gradually toward 2% over the medium term as the labor market improves further and the transitory effects of energy price declines and other factors dissipate," the Fed said in its statement. It projects the PCE price index to hit 0.6% to 0.8% by the end of this year and to reach 1.7% to 1.9% by the end of 2016.
        Tuesday's report showed energy prices rose 1% from January, ending seven consecutive monthly declines. Food prices increased 0.2%.
        The climb in core prices was driven largely by higher housing costs. Shelter expenses--reflecting the cost of housing, including rent--climbed 0.2%, accounting for about two-thirds of the overall rise in core prices.
        Prices for medical-care commodities increased 0.7% due largely to rising prices for prescription drugs. But prices for medical-care services dropped for the first time since 1975.
        A separate report Tuesday showed Americans' inflation-adjusted wages declined in February. Real average hourly earnings fell 0.1% from January, as the rise in overall prices offset a 0.1% increase in average hourly pay. Weekly real earnings fell 0.1%, reflecting the decline in inflation-adjusted hourly pay and no increase in workers' hours.
        Write to Josh Mitchell at joshua.mitchell@wsj.com
        (END) Dow Jones Newswires

        March 24, 2015 09:21 ET (13:21 GMT)

#FX
#Forex
#US_ConsumerPrices
#DollarStrong
#DollarWeak