U.S. import prices rebound; export prices fall

U.S. import prices unexpectedly increased in December after five straight monthly decreases, boosted by higher costs for natural gas and food, suggesting that the fight against inflation would be protracted even as consumer prices are trending lower.

Import prices rebounded 0.4% last month after declining 0.7% in November, the Labor Department said on Friday. Economists polled by Reuters had forecast import prices, which exclude tariffs, falling 0.9%. In the 12 months through December, import prices increased 3.5% after rising 2.7% in November.

“The Fed’s battle with inflation is likely to go on longer than markets think as the tailwinds from prices of imported goods coming into the country have turned back into headwinds,” said Christopher Rupkey, chief economist at FWDBONDS in New York.

The government reported on Thursday that monthly consumer prices fell for the first time in more than 2-1/2 years in December. Inflation is retreating as the Federal Reserve’s aggressive interest rate increases cool demand, and bottlenecks in the supply chain ease.

Subsiding inflation is seen allowing the U.S. central bank to further scale back the size of its rate hikes next month.

The Fed last year raised its policy rate by 425 basis points from near zero to a 4.25%-4.50% range, the highest since late 2007. In December, it projected at least an additional 75 basis points of hikes in borrowing costs by the end of 2023.

Imported fuel prices rose 0.6% last month after falling 3.7% in November. The first monthly rise since June 2022 reflected a 59.5% surge in natural gas prices, which offset a 2.7% decline in petroleum prices. The cost of imported food rose 0.4%.

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