US housing market improving, inflation pressures muted

WASHINGTON, Aug 19 (Reuters) :  US housing starts rebounded strongly in July, pointing to momentum in the economy, but a moderate increase in consumer prices suggested the Federal Reserve has room to keep interest rates low for a while.
Groundbreaking surged 15.7 per cent last month to a seasonally adjusted annual 1.09-million unit pace, the Commerce Department said on Tuesday, snapping two straight months of declines.
Economists had forecast starts to rise to a 969,000-unit rate in July.
The housing market is regaining its footing after being slammed by last year's run-up in interest rates. A shortage of properties for sale has also lifted prices, pushing housing out of the reach of many first-time buyers.
In a separate report, the Labor Department said its Consumer Price Index edged up 0.1 per cent last month as declining energy costs partially offset increases in food and rents. The CPI had increased 0.3 per cent in June.
In the 12 months through July, the CPI increased 2.0 per cent after advancing 2.1 per cent in June.
Stripping out food and energy prices, the so-called core CPI ticked up 0.1 per cent after a similar gain in June. In the 12 months through July, the core CPI increased 1.9 per cent after rising by the same margin in June.
Inflation edged up a bit from March through June, but labor market slack, marked by tepid wage growth, is keeping a lid on price pressures.
"The housing market's recent weakness appears to be reversing while the labor market appears to be improving. And all of this comes with only modestly building inflationary pressures," said Dan Greenhaus, chief strategist at BTIG in New York.
"As such, we think the Fed will find these data further supportive of the go-it-slow approach to exiting its accommodative policies."