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February inflationary measures fall within Fed’s 2% threshold

FXstreet.com (Barcelona) - The cost of living in the United States has risen by a greater margin than originally expected in the month February, due in part to the largest jump in gasoline prices in over than three years. However, despite this phenomenon, the retreat in fuel expenses this month does indeed reveal that inflation will be consistent with the Federal Reserve’s goal –not prompting additional action.

As such, the consumer-price index was up 0.7%, the first such increase in four months and the biggest since June 2009, cited a US Labor Department report showed Friday. In particular, the surge in gasoline accounted for almost 75% of last month’s total price advance, the report explained.

The limited ability to pass off higher costs of raw materials such as fuel gives the Federal Reserve policy makers room to keep injecting money into the US economy to stimulate growth and trim the jobless rate – an action that equity holders find quite acceptable. “Consumer prices will be more moderate going forward,” wrote Laura Rosner, a U.S. economist at BNP Paribas in New York, one of the best forecasters of the consumer-price index over the past two years. “We certainly don’t expect another increase of this magnitude in gasoline costs. The Fed will look at the report and think inflation is moderate and not a concern.”

Inflationary pressures were “modest,” the central bank said in its Beige Book report released back on March 6. “Most district contacts did not plan to increase prices.”
Policy makers, who track the price measure that is tied to consumer spending issued by the Commerce Department, have said their goal is to keep inflation at around the 2% threshold.

The CPI is the broadest of three price barometers from the Labor Department in that it includes goods and services. About 60% of the index covers prices consumers pay for services from medical visits to airline fares, movie tickets and rents. Indices for producer prices and import costs have each climbed last month on higher energy expenses, reports also showed this week.

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