MONETARY PARK: Fresh vegetables are displayed at a Friday Farmer's Market in Monterey Park, California yesterday. -AFP

WASHINGTON: A bump in fuel prices nudged the US Federal Reserve's preferred inflation measure a little higher in August, but price pressures remained tame, official figures showed.

One key measure that is closely watched by the central bank also fell to its lowest level in nearly two years, according to the Commerce Department. The weak reading was likely to sharpen disagreements among policymakers about whether to hike interest rates again this year.

Fed Chair Janet Yellen this week acknowledged that central bankers may have "misjudged" the strength of the forces driving inflation, which has remained persistently weak despite falling unemployment. The Personal Consumption Expenditures price index rose 0.2 percent for August, driven largely by rising costs in energy, and was double the pace of July's 0.1 percent increase.

The result fell short of a consensus forecast among analysts, who were expecting a 0.3 percent gain for the month. When excluding the volatile food and fuel categories, the measure rose only 0.1 percent, also a tenth of a point below analyst expectations-and the same level recorded over the prior three months.

Compared to August 2016, the price index held steady at 1.4 percent, the same level recorded in June and July-but down 0.8 points since February.

The "core" 12-month measure, which strips out food and fuel prices, actually fell a tenth to 1.3 percent, its lowest reading since November 2015.

This measure has undershot the Fed's two percent target for more than five years. After seven years of uninterrupted job creation and falling unemployment, economists have been befuddled by persistently weak inflation in the world's largest economy. Some research suggests that wages, the key driver of inflation, have remained low as job growth has been driven by part-time and temporary employment.

Economists said Friday that the weak numbers were likely not enough to tip the balance against another Fed rate hike in December, which would be the third so far this year. "The inflation data came in slightly lower than expected and again there will be those who argue that this means the Fed is less likely to hike rates in December," RDQ Economics said in a research note.

However, Yellen's speech this week explained the effects of Fed policy occur at a lag, meaning the central bank act sooner rather than later, it said. "We still expect the Fed to hike at that meeting." -AFP