US unemployment claims rise by 20,000 amid signs of divisions within Fed | Business | guardian.co.uk

US unemployment claims rise by 20,000 amid signs of divisions within Fed | Business | guardian.co.uk

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 unemployment benefits increased 20,000 to a seasonally adjusted 362,000, the Labor Department said on Thursday.

It said in a second report that consumer prices were flat for a second consecutive month in January. The data comes 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 substantial improvement in the outlook for the labor market.

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

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 applications to rise to 355,000. Last week's data covered the survey period for the February nonfarm payrolls report. Claims were up 27,000 between the January and February survey periods.

But this probably does not suggest any material change in the pace of job growth given that claims been very volatile since January because of difficulties smoothing the data for seasonal fluctuations.

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, the Labor Department said.