Economic reports published Tuesday show new home sales surging in the United States, while consumer prices rose slightly in February. Some economists say the data may encourage the U.S. central bank to boost interest rates as soon as June.
Labor Department data show consumer prices rose two-tenths of a percent in February, after declining previously. U.S. oil prices had fallen sharply, and the savings rippled through the entire economy, keeping prices in check.
That left inflation below the two percent annual rate Federal Reserve experts say is healthy for the economy. As the Fed tries to guide the economy, it aims for full employment and stable prices.
The Fed encouraged growth during the financial crisis by cutting the key interest rate nearly to zero. Now that the job market, economic growth, and the housing market have improved, the Fed is considering how soon and how much to raise the rate.
Fed Chair Janet Yellen recently told journalists that tepid economic data weakened the case for an interest rate hike, but said the weakness will probably be temporary.
"My colleagues and I continue to expect that as the effects of these transitory factors dissipate and as the labor market improves further, inflation will move gradually back toward our two percent objective over the medium term," said Yellen.
PNC Bank senior economist Gus Faucher predicts that inflation will rise toward the two percent target rate over the next couple of month, and says the Fed will probably raise rates in mid-2015.
Tuesday’s Commerce Department report may be more evidence of a strengthening economy that no longer needs the support of ultra-low interest rates. The data show sales of new homes climbed to their highest pace in seven years during February. If new home sales continued at that rate for a full year, 539,000 homes would change hands.
