Economy Firming Indicates Inflation Data

In May, consumer prices increased and a gauge for underlying pressures on prices showed it was stabilizing after a long period of decline, which is a potential comfort to policymakers in the Federal Reserve who want to see a stronger sign of inflation.

On Tuesday, other data showed that groundbreaking at new home construction sites had increased, the latest indication that the housing market recovery in the U.S. will help to counter this year’s drag on the overall economy from the austerity programs the government imposed on March 1.

The Department of Labor said the Consumer Price index had edged higher by 0.1% in May, following two consecutive months of declines.

In what appears to be a sign of more demand in the nation’s economy, consumer prices excluding energy and food increased by 0.2%, just higher than they did for April.

These “core” prices as they are called, which the Federal Reserve monitors closely due to them being less volatile, increased during the 12 months through the end of May by 1.7%.

Last month’s increased match that of the gains in April and supported opinions that a downward trend in the nation’s core inflation, which started nearly a year ago, could be approaching an end.

While the reading for May in 12-month inflation is still below the target set by the Fed of 2%, a stabilization could cause the Fed to be more comfortable pulling back on its programs of economic stimulus, as soon as the fall.

On Tuesday, the Fed starts a two-day committee meeting, in which the opinion is it will leave the stimulus program in place as it is with no change.

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