Consumer prices up
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.