Ahead of the Bell: US Consumer Price Index

US consumer prices likely rose slightly last month as inflation remains tame

Associated Press
US consumer prices rise just 0.2 pct. in September
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FILE - In this Monday, Sept. 23, 2013, file photo, price tags hang on merchandise at T.J. Maxx in North Andover, Mass., Ma. The government reports on consumer prices for September on Wednesday, Oct. 30, 2013. (AP Photo/Elise Amendola, File)

WASHINGTON (AP) -- The Labor Department reports Wednesday on changes in the consumer price index in September. Report to be released at 8:30 am EDT.

MILD INCREASES: Economists forecast that consumer prices rose 0.2 percent in September, according to a survey by FactSet, up from 0.1 percent in August. Excluding volatile costs for food and energy, core prices are expected to have also increased just 0.2 percent.

INFLATION MILD: A weak economy has kept inflation largely in check since the recession ended four years ago. High unemployment and meager wage increases have made it difficult for Americans to pay more for most goods. That has also made it hard for retailers to charge more.

Prices rose just 1.5 percent in August compared with a year earlier, below the Federal Reserve's inflation target of 2 percent. Core prices, meanwhile, have increased 1.8 percent in the past year.

FED IMPACT: With inflation below the Fed's target, the central bank faces less pressure to dial back its $85 billion in monthly bond purchases, which are intended to stimulate growth. Critics of the bond buying program fear it will spark higher inflation in the future.

In fact, with consumer prices increasing at such a tepid pace, the Fed may face more pressure to extend the purchases. Some Fed officials have objected to slowing the bond-buying program with inflation below 2 percent. A small amount of inflation can be good for the economy, because it encourages consumers and businesses to spend and invest before prices rise further.

Fed policymakers will conclude a two-day meeting Wednesday. Economists expect the Fed won't make any changes to its current policies, which include keeping the short-term interest rate it controls at nearly zero.

The consumer price figures were originally scheduled to be released Oct. 16, but were delayed by the 16-day partial government shutdown.

The shutdown has likely slowed growth in an already weak economy. Growth was probably just 1.5 percent to 2 percent at an annual rate from July through September, down from 2.5 percent in the April-June quarter. And economists expect little pickup in the October-December quarter. The shutdown likely cut a quarter to a half-percentage point from growth in the final three months of the year.

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