Given this information, the Fed “should be a little more uncertain about forecasting inflation than it was”, says Athanasios Orphanides, a former governor of the Central Bank of Cyprus, a Fed economist, and a professor at the MIT Sloan School of Management.
At their annual retreat in Jackson Hole last month, several top officials of the Federal Reserve board reiterated their desire to raise interest rates, even if the recent market turmoil may have put these plans on hold for the moment.
Fewer Americans applied last week for unemployment benefits keeping this indicator that is an important metric for the health of the labor market near all time lows.
One chief economist said the result had been consistent with a labor market that was healthy generating close to 250,000 jobs each month. The Fed is officially committed to maintaining an average inflation rate of 2 percent.
The prices charged by USA manufacturers, farmers and other producers were unchanged in August, the latest evidence that inflation is tame.
Falling import prices have pushed the Federal Reserve’s goal of 2% inflation far into the future.
Prices for agricultural exports tumbled by 2.6% in August following a 1.1% jump in July, while prices for non-agricultural export prices fell by 1.3% after slipping by 0.5%.
The ebb in consumer sentiment and benign price pressures despite a rapidly tightening labor market pose a dilemma for Fed officials who are contemplating raising rates for the first time in almost a decade. The state of New York reported a 4,642-rise in initial claims due to layoffs in the transportation and warehousing, education service, and manufacturing industries.
Import prices now have declined in 12 of the last 14 months. It’s been about as good or better, than I was expecting in terms of the US economy. The likelihood of a lift-off in the Fed’s benchmark overnight interest rate has been diminished by recent financial market turbulence. Import prices excluding petroleum slipped 0.4 percent, reflecting the impact of the dollar’s 17.5 percent rise against the currencies of the United States’ main trading partners since June 2014. Over the past 12 months, the unemployment rate has also fallen by a full percentage point.