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Consumer prices tick up by 0.1%

September’s gain smallest since June; energy costs fall back

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Photographs by AP/SUE OGROCKI

Consumer prices, paid by U.S. shoppers like these in Oklahoma City, rose 2.3 percent in the 12 months that ended in September.

WASHINGTON -- Consumer prices edged up a slight 0.1 percent in September as energy prices retreated after a big gain in August.

The Labor Department said Thursday that the September gain in its closely watched consumer price index followed a 0.2 percent rise in August. It was the smallest monthly gain since June.

Inflation has been on a slight rise this year after a prolonged stretch when prices kept falling below the 2 percent target set by the Federal Reserve. For the 12 months ended in September, consumer prices were up 2.3 percent.

Core inflation, which excludes volatile energy and food costs, rose 0.1 percent in September, the same level as in August. It is up 2.2 percent over the past year.

The inflation figures partly reflect a 3 percent monthly decline in prices for used cars and trucks, the biggest drop in 15 years. Prices for new cars and trucks fell a slight 0.1 percent.

The Federal Reserve has raised interest rates three times this year and signaled that it will raise rates one more time in 2018 in an effort to make sure that a strong economy and low unemployment do not trigger an unwanted rise in inflation. The jobless rate fell to a 49-year low of 3.7 percent in September.

Economists said they believed inflation will accelerate further in coming months, reflecting a strong economy being propelled by tax cuts and employment gains.

"Barring a rapid escalation of trade tensions that would disrupt economic activity, we foresee another Fed rate hike before the end of the year," said Gregory Daco, chief U.S. economist at Oxford Economics. He predicted the Fed would raise rates another three times in 2019 in an effort to make sure price pressures do not get out of hand.

President Donald Trump, however, has stepped up his criticism of the Fed's rate increases, calling them unwarranted. Rising interest rates were one of the factors blamed for the big sell-off on Wall Street this week.

Trump, who has often pointed to the stock market surge as evidence that his economic policies are working, said Wednesday that the Fed had "gone crazy" raising short-term interest rates. He renewed his criticism Thursday, telling reporters, "I think the Fed is out of control."

So far, inflation, while higher than it has been, is remaining close to the Fed's target of 2 percent annual price increases. But some economists worry that with labor markets so tight, wage gains will start to accelerate, forcing businesses to charge more for their products.

For September, energy prices fell 0.5 percent after a 1.9 percent surge in August. Food costs were flat in September after a tiny 0.1 percent rise in August. Seasonally adjusted gasoline prices decreased 0.2 percent, following a 3 percent increase.

Categories showing increases included shelter, which accounts for about one-third of the index and rose 0.2 percent from August, the smallest gain in three months. Apparel prices increased 0.9 percent, the biggest gain since February, after a 1.6 percent monthly drop in August that was the most in almost seven decades. Airfares rose 1 percent.

The Fed's preferred gauge of inflation -- a separate consumption-based figure from the Commerce Department -- has been just above the central bank's 2 percent goal in recent months, and the figure tends to run slightly below the Labor Department's consumer price index. September numbers are due on Oct. 29.

"It's a benign number," Constance Hunter, chief economist at KPMG, said Thursday on Bloomberg Television. "The Fed has said they're going to do one more this year, more or less, and then three next year. I think that's completely on track."

A separate Labor Department report on Thursday showed filings for unemployment benefits ticked up last week while remaining near the lowest level since 1969. Initial jobless claims rose 7,000 to 214,000, with North Carolina and South Carolina still reflecting the impact of Hurricane Florence, according to the report, which may also indicate volatility around the Columbus Day holiday.

Information for this article was contributed by Martin Crutsinger of The Associated Press and by Jeff Kearns of Bloomberg News.

Business on 10/12/2018

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