"Some Fed officials have expressed concern about inflation, but I think the Fed is cognizant of the fact that we're probably at the low readings on inflation"
-Omair Sharif, an economist at RBS Securities Inc. in Stamford
Housing starts in the world's largest economy rose less than expected last month, reflecting labour and material constraints, however the overall trend remains consistent and the housing market is expected to gain momentum. The Commerce Department said that housing starts jumped 6.8% in May, to a 914,000 annualized rate after a revised 856,000 in the preceding month, and below analysts' expectations, who projected a reading of 950,000. Data also showed that application to build one-family house rose 1.3% to 622,000, the fastest pace since May 2008. The fact that building permits are exceeding the number of starts are suggesting the construction will keep rising, supported by improved labour market and historically low mortgage rates.
In a separate report the Labor Department said that the U.S. consumer prices were restrained by the first drop in food prices in almost four years in May, adding to signs inflation remains under control. The nation's consumer prices edged higher 0.1%, recovering from a 0.4% drop in April, but missing forecasts of a 0.2% gain. At the same time, core inflation, which excludes volatile food and fuel prices, increased 0.2% in line with projections. The Federal Reserve, however, targets another report from the Commerce Department, known as the PCE index, which showed even weaker levels of core inflation.
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