|By NELSON D. SCHWARTZ|
The Federal Reserve finally seems to be getting what it wants.
Two indicators of economic health that the Fed and its chairwoman,
In particular, economists said, a rise in the Consumer Price Index in April, along with several other reports this week, suggest a broader economic firming is underway after a weak, weather-plagued start to 2014.
Besides the increase in consumer prices reported on Thursday, data Wednesday on producer prices showed a rise of 0.6 percent last month, the largest increase since
At the same time, a survey of small-business optimism on Tuesday showed sentiment at its best level since before the recession began in
“It’s not just the C.P.I.,” said
These nascent signs of a rebound in
Although preventing higher inflation has long been the traditional concern for central bankers, and many remember it as a serious problem from the 1970s, the Fed has been more worried in recent years about the risk of stagnant prices, which reflect an economy struggling to recover from the financial crisis and recession.
As recently as last month, in a speech in
The American economy is still emerging from a very slow patch. The first estimate for the growth rate of the economy last quarter showed that output expanded at a rate of just 0.1 percent, and that number may even drop into negative territory when the
Still, many private experts, as well as the policy makers at the Fed, argue that a substantial part of the weakness last quarter was caused by frigid temperatures and wintry conditions that delayed business activity in many part of the country, rather than a fundamental slowdown.
Private economists forecast overall growth in
The advance on the price front was widespread. “Virtually anywhere you look in this report, you see inflation is turning somewhat higher,” said
For example, he pointed to increases in prices for new and used vehicles, airline tickets and prescription drugs, as well as for apartment and house rentals. “It’s not where you’d say there was an inflation problem, but the Fed is starting to get their wish for a move up in the inflation rate,”
The less volatile core rate of the Consumer Price Index, which excludes food and energy prices, increased by 0.2 percent in April, compared to the 0.1 percent gain economists had expected.
One reason that the Fed worries about persistently low inflation and the threat of deflation is that they discourage consumer spending and hold back investment. They are also difficult to overcome, as Japan’s experience in recent years has shown.
With inflation now showing signs of picking up, and a gradual improvement in the labor market bringing the unemployment rate down to 6.3 percent in April, the Fed is now on a glide path that could lead to the first increase in short-term rates, starting in the second half of 2015.
“If inflation continues to rise as we expect it to, and the unemployment rate keeps falling, it could potentially change the timing of the first rate hike and move it up slightly,”
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