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Inflation, jobs data favor easy Fed policy
Aggregated Source: Shanghai Daily: Business

MORE Americans than expected filed new claims for jobless aid last week and consumer prices were flat in January, supporting the argument for the Federal Reserve to maintain its very accommodative monetary policy stance.

Initial claims for state jobless benefits rose 20,000 to a seasonally adjusted 362,000, the US Labor Department said yesterday.

It said in a second report that consumer prices were flat for a second consecutive month in January. The data come amid growing signs of divisions at the Fed over its bond buying program aimed to stimulate the sluggish economic recovery.

"The job market is gradually improving but not fast enough for the Fed to remove accommodation. We still think a Fed rate hike is a late 2014 to early 2015 event," said Jacob Oubina, a senior economist at RBC Capital Markets in New York.

Concerns over tepid job growth prompted the US central bank last year to embark on an open-ended bond buying program. It said it would keep up the program, which it hopes will push down borrowing costs, until it saw a sharp improvement in the labor outlook.

The Fed also has committed to hold interest rates near zero until unemployment reaches 6.5 percent, provided inflation does not threaten to push over 2.5 percent.

However, minutes of the January 29-30 policy meeting published on Wednesday showed some Fed policymakers feel the central bank may have to slow or stop the asset purchases before it sees an acceleration in job growth because of concerns over the costs of the program.

Economists polled by Reuters had expected first-time jobless filings to rise to 355,000. With inflation pressures well contained and the labor market only gradually improving, a shift in Fed policy is unlikely.

Last month, the Consumer Price Index was held back by weak gasoline prices and food prices, which were unchanged after rising over the past months.

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