Barriers to US rate rise are crumbling

US consumer prices rose for a fifth straight month in June as the cost of gasoline and a range of other goods increased, further signs of firming inflation that strengthen the case for an interest rate hike this year.
By The Newsroom
Published 17th Jul 2015, 18:35 BST

Other data yesterday suggested the economy could support a tightening of monetary policy. Housing starts surged in June and building permits soared to a near eight-year high. Federal Reserve Chair Janet Yellen this week affirmed the US central bank was keen to start raising interest rates later this year.

“The barriers to a Fed hike are starting to crumble. The wait for the first rate hike may not be that much longer,” said Joel Naroff, of Naroff Economic Advisors in Holland, Pennsylvania.

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The Labor Department said its Consumer Price Index rose 0.3 per cent last month after increasing 0.4 per cent in May. Last month’s increase pushed the year-on-year CPI rate into positive territory for the first time since December.

The energy-driven disinflationary trend appears to have run its course, with producer prices rising in June for a second straight month.

In a separate report, the Commerce Department said groundbreaking for new homes rose 9.8 per cent to a seasonally adjusted annual pace of 1.17 million units in June. Permits for future home construction increased 7.4 per cent to a 1.34 million-unit rate, the highest level since July 2007.

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