U.S core CPI posts at 0.2% in January versus December’s 0.1%

By: Michael Harris
Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to Invezz. His… read more.
on Feb 13, 2020
Updated: Jun 23, 2020
  • U.S core CPI posts at 0.2% in January versus December’s 0.1%.
  • U.S Fed expects annual inflation to continue its increase towards the 2% target in 2020.
  • EUR/USD dropped to 1.0835 following the economic data on Thursday.

The U.S Bureau of Labor Statistics announced the Consumer Price Index (CPI) on Thursday. The report cited greater household spending on clothing and rents that saw an increase in the index in January. Thursday’s data, as per the experts, suggested that annual inflation in the U.S is likely to continue its increase toward the Federal Reserve’s target of 2% in 2020.

The core CPI (excluding volatile components like food and energy) printed a 0.2% increase in January as compared to December’s 0.1%. Higher prices in the healthcare sector, airline tickets, academia, and recreation also contributed to improvement in the underlying inflation last month.

Core CPI Increased 2.3% In The Past 12 Months

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In the past 12 months, the core CPI posted a higher 2.3% increase. The core PCE (personal consumption expenditures) is a prominent measure that the U.S Federal Reserve uses to get an insight into its annual inflation target of 2%. The core PCE recorded a 1.6% increase in December. Data for January is to be published later in February.

In the past 12 months, the CPI registered a 2.5% increase that marked the sharpest gain since 2018’s October. Last December, the CPI had recorded a 12-month gain of 2.3%. Gasoline prices printed a 1.6% decline in January versus December’s 3.1% increase. Food prices noted a 0.2% gain that was reported in line with December’s reading.

In terms of owners’ equivalent rent (primary residence), the gain was highlighted at 0.3%. The increase was capped at 0.2% in the past two months in a row. Shelter index posted a 0.4% increase last month versus 0.2% in December. In the healthcare sector, the rise in costs was 0.2% in January as compared to December’s 0.5%. While prices for new vehicles remained unchanged in January after a 0.1% increase in December, used vehicles and trucks saw a 1.2% decline in prices last month versus a much small 0.4% drop in December. Lastly, apparel prices were reported up by 0.7% in January while the surge was capped at 0.1% in December.

Response In The Forex Market

Thursday’s economic data added to the list of reports that fueled strength in the U.S dollar index. The index rose to 98.93 that saw a further decline in the EUR/USD currency pair in the forex market. Following the release of data, EUR/USD was reported trading as low as 1.0835. At the time of writing, the currency pair is exchanging hands at 1.0848.

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