Oil, Food Push Consumer Prices Up
By LUCA DI LEO And JEFF BATER WASHINGTON—Rising gasoline and food costs continued to drive an increase in inflation last month, but there were few signs of a broader price rise that would complicate the Federal Reserve's efforts to boost the economy and jobs. Overall consumer prices rose a seasonally adjusted 0.4% in April from March, the Labor Department said Friday. That followed increases of 0.5% in March and February that were also driven by higher energy and grocery prices. Underlying inflation, which excludes energy and food costs, rose 0.2% in April after a 0.1% increase in March. The results were in line with what economists had forecast in a Dow Jones Newswires survey. The Fed believes underlying inflation is a better indication of where prices will be more than a year from now, which is how long it takes for its policies to affect the economy. The U.S. central bank must balance a desire to cut unemployment against concerns that prices could spike. If there are signs that inflation is rising too much, the Fed would have to increase interest rates from near zero, a move that could hurt the economy and jobs. There was little evidence of that happening in Friday's government report. While the consumer-price index rose by 3.2% on an annual basis, the highest level since Oct. 2008, so-called core inflation stood at 1.3% compared with April 2010, which is within the central bank's comfort zone of just under 2.0%. Fed Chairman Ben Bernanke expects higher prices for oil, grains and other commodities will subside, helping to keep broader inflation in check and allowing him to keep the credit tap open. The decline in oil and other commodity prices over the past two weeks appears to have confirmed his expectation. "The report is very much consistent with the Fed's views," said Randall Kroszner, a Fed board member from March 2006 to January 2009 who now teaches at the University of Chicago Booth School of Business. "We're not seeing inflation … [Read More...]
Oil price volatility challenges Canadian and global markets: Ernst & Young
TORONTO, May 13 /CNW/ - Short-term oil and gas supply and demand remains relatively balanced, but oil prices are up due to a number of geopolitical factors, sending ripple effects through both the Canadian and the global markets, Ernst & Young says. "The extreme price volatility we're seeing has been driven by a number of factors - political upheaval in North Africa and the Middle East, the strengthening of emerging economies and more unpredictable events like the disaster in Japan," explains Lance Mortlock, Ernst & Young, Canada. "Now, the markets are actually reacting to a potential supply problem, not necessarily real-time fundamentals." Ernst & Young's quarterly global oil and gas report finds that global economic growth … [Read More...]