Ahead of the Bell: US Consumer Prices
WASHINGTON (AP) — Lower prices at the pump likely offset higher food costs and drove down a measure of U.S. consumer prices last month, the latest evidence that inflation is tame.
Economists forecast that the consumer price index fell 0.2 percent in November, according to a survey by FactSet. That's down from a 0.1 percent gain in October.
Consumer prices excluding volatile food and energy costs are forecast to have increased 0.2 percent. The Labor Department will release the consumer price index at 8:30 a.m. EST Friday.
Gas prices rose sharply over the summer, pushing up the consumer price index in August and September. But gas prices have since fallen about 50 cents in the past two months to a nationwide average of $3.30 a gallon on Thursday, according to AAA.
Food prices are likely to move in the other direction. The drought that affected the Midwest this summer may have pushed up food prices in November, economists say. It damaged corn, soybeans and other crops. Corn and soybeans are used in animal feed, which means the price of meat and chicken could increase.
And corn is also used in many products found throughout the supermarket, from cereals to soft drinks to cosmetics.
In the 12 months that ended in October, consumer prices increased just 2.2 percent, just above the Federal Reserve's inflation target. Core prices also rose 2 percent over the same period.
With the economy weak and unemployment high, many businesses are reluctant to raise prices for fear of losing customers. That's helped keep inflation mild. Workers also aren't able to demand higher wages when growth is weak. That limits their ability to pay more.
Modest inflation leaves consumers with more money to spend, which can boost economic growth. Lower inflation also makes it easier for the Fed to continue with its efforts to rekindle the economy. If the Fed were worried that prices are rising too fast, it might have to raise interest rates.
The Fed said Wednesday that it now plans to keep the short-term interest rate it controls at nearly zero until the unemployment rate falls to at least 6.5 percent and inflation isn't expected to top 2.5 percent in the next two years.
It was the clearest sign yet that they will keep rates super-low even after unemployment falls further and the economy picks up. The Fed also said it would continue purchasing $85 billion in Treasury bonds and mortgage-backed securities each month in an effort to push down longer-term interest rates.
In a statement, Fed policymakers said that they expect "inflation over the medium term will likely run at or below" its 2 percent objective.