Con­sumer prices up

The Guardian (Charlottetown) - - BUSINESS -

Con­sumer prices posted a slight gain in July, with higher costs for med­i­cal care and cloth­ing off­set­ting de­clines for ho­tel stays and con­sumer cell­phone plans.

The La­bor De­part­ment said Fri­day that its con­sumer price in­dex edged up 0.1 per cent last month af­ter no gain in June and a 0.1 per cent fall in May. Core in­fla­tion, which ex­cludes volatile en­ergy and food changes, was also up a slight 0.1 per cent in July.

Both over­all in­fla­tion and core in­fla­tion have risen an iden­ti­cal 1.7 per cent over the past 12 months. That shows that in­fla­tion pres­sures re­main well un­der con­trol. In fact, a sep­a­rate in­fla­tion gauge favoured by the Fed­eral Re­serve has been slow­ing this year, rais­ing con­cerns that in­fla­tion is fall­ing far­ther from the Fed’s 2 per cent goal.

The Fed has raised its bench­mark in­ter­est rate in March and June, and has sig­nalled it plans a third rate hike be­fore year’s end. But pri­vate econ­o­mists say the Fed may stand pat for the rest of 2017 un­less in­fla­tion ac­cel­er­ates in com­ing months. The Fed’s pre­ferred in­fla­tion gauge showed a 12-month price gain of 2.2 per cent in Fe­bru­ary, but its lat­est read­ing has slowed to a gain of just 1.4 per cent.

Fed Chair Janet Yellen has blamed the slow­down on tem­po­rary fac­tors such as a price war in the cel­lu­lar phone in­dus­try that has pushed monthly mo­bile phone charges down. But she has also in­di­cated that if her view is proven wrong, she is ready to sup­port a change in the Fed’s plans for rate hikes. The Fed meets again in Septem­ber. An­a­lysts be­lieve it will keep rates un­changed and may not hike again un­til De­cem­ber.

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