US inflation unexpectedly cools on prices for autos, drugs

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US inflation unexpectedly cools on prices for autos, drugs

This should make the FOMC comfortable with its recent decision to be patient on monetary policy, and await clearer signs on how slower global growth and weaker confidence shows up in domestic data in the months ahead.

U.S. Treasury yields drifted lower on Tuesday after data showed a modest rise in core inflation in February as well as the headline number on an annual basis, backing expectations the Federal Reserve will remain pat on any interest rate moves throughout the year.

Consumer price inflation for the rural areas stood at 1.81 per cent in February 2019 against 1.29 per cent in January, and 4.45 per cent in February 2018. A Reuters poll of economists had predicted a growth of 2 per cent for January.

In another set of data released by the Government, industrial production or factory output slipped to 1.7 per cent in January 2019 from 2.4 per cent in December 2018 on account of slowdown in the manufacturing sector.

Food price inflation for urban areas stood at 1.27 in February 2019 against (-) 0.96 per cent in January 2019 and 2.45per cent in February past year.

The January PCE price data will be released on March 19. Such figures give President Donald Trump another opportunity to claim credit for lower pharmaceutical prices, an issue that he's recently tweeted about several times.

In the 12 months through February, the core CPI rose 2.1%. The CPI increased 1.6% on a year-on-year basis in January.

Even on a month-on-month basis, the Index of Industrial Production (IIP) declined during the month under review from December 2018 when it stood at 2.60 per cent.

What matters here is that inflation has remained muted and is now handily under that 2.0% to 2.5% range that has been within the Federal Reserve mandate with some slight changes over time.

In a wide-ranging interview with CBS's 60 Minutes television news program, Fed Chairman Jerome Powell on Sunday reiterated the central bank's wait-and-see approach to further monetary policy tightening this year. It hit the US central bank's 2 percent inflation target in March a year ago for the first time since April 2012. This marks the strongest inflation-adjusted wage growth since November 2015, an increase that would likely help consumer spending and economic growth. But excluding food and fuel costs, the core CPI fell short of a forecasts, rising only 0.1 percent.

Prices of fruits (-4.62 per cent) and vegetables (- 7.69 per cent) continued to decline in February. That followed a 1.1 per cent jump in January. Consumers paid more for motor vehicle insurance, airline fares, household furnishings and personal care products.

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