By Canadian Press

US consumer prices ticked up 0.2 per cent in August

Sep 16, 2016 | 6:45 AM

WASHINGTON — U.S. consumer prices edged up 0.2 per cent in August as a surge in medical care offset flat readings for food and energy.

The result follows an unchanged figure in July. Core inflation, which excludes the volatile categories of food and energy, rose 0.3 per cent, the Labor Department reported Friday. It was the biggest monthly increase since February. The climb in core inflation was led by a record jump in drug prices and the biggest rise in doctor and hospital charges in a quarter-century.

Over the past 12 months, core inflation is up 2.3 per cent but overall inflation has risen a more moderate 1.1 per cent, still well below the Federal Reserve’s 2 per cent target for annual increases in inflation.

The Fed meets next week and is expected to keep its key interest rate unchanged at a near-record low of 0.25 per cent to 0.5 per cent. The Fed raised rates by a quarter-point last December but since then, officials have held off on further rate hikes, reflecting concerns about sluggish economic growth and periodic turbulence in financial markets.

Economists believe the Fed’s next rate hike will not come until December. Steve Murphy, U.S. economist at Capital Economics, said the latest report on consumer inflation is unlikely to alter that view.

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“Domestic price pressures continue to build, but only very gradually,” he wrote in a research note.

The rise in core inflation in August was led by a record 0.9 per cent rise in drug prices and a 0.9 per cent jump in the cost of medical services such as doctor visits and hospital stays. It was the biggest one-month rise in this category since November 1990.

Food costs were unchanged in August, with the category that covers meat, poultry, fish and eggs falling for the 12th month in a row.

Energy costs were also flat in August as gasoline dropped by 0.9 per cent. The decline was offset somewhat by a rise in electricity and natural gas prices.

Housing and rental costs were up 0.3 per cent in August and have risen 3.4 per cent over the past year. Medical care services are up 5.1 per cent, the biggest increase for any of the major categories.

Martin Crutsinger, The Associated Press