U.S. import prices fell for the first time in six months in August on weak petroleum and food costs, but the declining trend is slowing as oil prices stabilize and the dollar’s rally fades, Reuters reports.
Still, today’s report from the Labor Department suggests the near-term inflation outlook would remain tame, strengthening the argument for the Federal Reserve to keep interest rates steady next week.
Import prices slipped 0.2% last month after gaining 0.1% in July. August’s drop was the first since February and was led by a 2.8% decline in petroleum prices. Imported petroleum prices fell 3.6% in July.
In the 12 months through August, import prices fell 2.2%, the smallest decrease since October 2014, after declining 3.7% in July.
“Most Fed officials expect the gradual climb toward the inflation target to remain intact and the diminishing drag from import price deflation will help, but it’s going to take time,” says Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina. “We expect the Fed to remain cautious, leaving rates unchanged next week.”
August’s weak inflation reading added to slower job growth, soft manufacturing and services sectors surveys in reducing the likelihood of an interest rate hike at the Fed’s Sept. 20-21 policy meeting.
Fed Governor Lael Brainard said on Monday she wanted to see stronger consumer spending data and signs of rising inflation before raising interest rates.
The U.S. central bank lifted its benchmark overnight interest rate at the end of last year for the first time in nearly a decade, but has held it steady since amid concerns over persistently low inflation.
