U.S. inflation stirring as healthcare, housing costs surge
U.S. consumer prices rose more than expected in August as healthcare costs recorded their biggest gain in 32-1/2 years, pointing to a steady build-up of inflation that could allow the Federal Reserve to raise interest rates this year.
The cost of living last month was also pushed up by sustained increases in rents. The uptick in inflation is likely to be welcomed by Fed officials when they gather next week to deliberate on monetary policy, though a rate hike is not expected at that meeting.
"The economy may not be firing on all cylinders, but growth is enough to spark a little more inflation than we thought. The Fed decision is going down to the wire," said Chris Rupkey," chief economist at MUFG Union Bank in New York.
The Labor Department said on Friday its Consumer Price Index increased 0.2 percent last month after being unchanged in July. In the 12 months through August, the CPI increased 1.1 percent after advancing 0.8 percent in the year through July.
The so-called core CPI, which strips out food and energy costs, rose 0.3 percent last month, the biggest increase since February, after gaining 0.1 percent in July.
Economists had forecast the CPI nudging up 0.1 percent last month and the core CPI gaining 0.2 percent. The core CPI increased 2.3 percent in the 12 months through August after rising 2.2 percent in the year through July.
Dollar gains after inflation data suggest more hawkish Fed
The U.S. dollar hit a more than two-week high against a basket of major currencies on Friday after U.S. inflation data boosted bets the Federal Reserve would raise interest rates in December, and touched a one-month high against sterling on worries over Britain's Brexit vote.
Traders' expectations of a rate hike from the Fed at its meeting next week rose slightly to 15 percent from 12 percent on Thursday, according to CME Group's FedWatch program, while expectations for December rose to nearly 52 percent from just over 47 percent.
The inflation data suggested a greater probability of a December move from the U.S. central bank and a quicker pace of rate increases next year, analysts said.
The dollar index, which measures the greenback against a basket of six major currencies, rose 0.8 percent to 96.063 .DXY. The euro EUR= hit a 10-day low against the dollar of $1.1149, while the dollar hit a two-week high against the Swiss franc CHF= of 0.9817 franc.
Crude oil prices fell 2 percent on Friday
Crude oil prices fell 2 percent on Friday to multi-week lows as swelling Iranian exports reinforced fears of a global glut, while gasoline rallied on refinery and pipeline outages.
Falling U.S. equity markets and a rising dollar also weighed on crude futures and other commodities denominated in the greenback. [.N] [FRX/]
Gasoline rose 2 percent after outages on Colonial Pipeline's main gasoline line and in a key unit of BP Plc's refinery in Whiting, Indiana. The profit for turning crude into gasoline hit three-month highs and pump prices for the fuel rose as well.
Brent crude futures settled down 82 cents, or 1.8 percent, at $45.77 a barrel, hitting a two-week bottom of $45.48.
U.S. West Texas Intermediate crude futures fell 88 cents, or 2 percent, to settle at $43.03 a barrel. WTI hit a five-week low of $42.74.
For the week, Brent fell 5 percent, while WTI lost 6 percent.
New York bombing
Police are hunting for answers on what caused an explosion that injured 29 people in New York's Chelsea neighborhood, shortly before a second suspicious device was found nearby.
New York City Mayor Bill de Blasio told reporters early indications are that the explosion at 23rd Street and 6th Avenue in Manhattan at about 8.30 p.m. Saturday "was an intentional act."
Reference: Reuters, CNN
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