Annual inflation in USA accelerated in December to above 2% for the first time since mid-2014. The trend reflects rising gasoline prices and robust consumer demand. The consumer price index (CPI) rose by 0.3% in December on a monthly basis, according to the latest data of Ministry of Labour. Without volatile categories, such as food and energy, the prices increased by 0.2% compared to November. The growth is in line with expectations of economists.
Compared to last year, the prices increased by 2.15% in December, which is the biggest 12-month increase since June 2014. The prices recorded an increase of 2.2%, excluding the food and energy prices.
The rate of inflation above 2% suggests that the era of historically low price increases is over. This primarily reflects recovery in energy prices after their steep decline, but also shows that many companies have reported enough demand to overcome the modest price growth.
The US Federal Reserve targets annual inflation rate of 2%, although the preferred indicator of the central bank’s price index of Commerce Department of personal consumption expenditure. According to the index, which rose to 1.4% yoy in November, the inflation in the US is below the annual target of the central bank for the last four and a half years.
The more sustainable inflation could give the Fed more leeway to increase interest rates this year. The central bank raise rates once in the last two years. Fed officials, gave indications for three increases in the benchmark interest rate by a quarter percentage this year.
The current report showed that last month the prices of petrol, accommodation and transport grew, while those of food products remained unchanged.