WASHINGTON — Overall U.S. consumer prices rose a scant 0.1
The rise in core inflation grabbed attention in financial markets, where investors have been sending bond yields up in recent days out of concern that rising inflation may prompt the Federal Reserve to accelerate the pace of its interest rate hikes. The yield on the two-year Treasury note surpassed 2
Paul Ashworth, chief U.S. economist at Capital Economics, said the inflation report bolstered his view that the Fed will accelerate rate increases this year. He said he expected the next rate hike to occur in March, with a total of four increases coming this year as inflation strengthens. Last year, the Fed raised its key short-term rate three times.
The Fed has been trying, so far unsuccessfully, to increase average annual inflation to its target rate of 2
"Once spring comes around ... the big declines in components like wireless telephone services will drop out of the annual calculation, and the core inflation rate will rebound well above 2
The slight 0.1
After maintaining a benchmark policy rate at a record low near zero for seven years, the Fed started gradually raising rates modestly — once in December 2015 and again in December 2016. Having raised rates three additional times last year, the central bank has forecast the same number of rate increases this year. But some economists think the Fed might be forced to accelerate the pace if signs emerge that inflation is picking up, given that unemployment is hovering at a 17-year low.
For December, energy prices fell 1.2
Food costs edged up 0.2
Clothing costs are one key sector bucking the trend of higher prices. Clothing costs have fallen the past four months and have declined 1.6
Martin Crutsinger, The Associated Press