Lower US import prices suggest inflation will remain benign

US import prices fell for a second consecutive month in June amid further declines in the cost of petroleum products, suggesting inflation pressures could remain benign for a while.

The labour department said on Tuesday that import prices decreased 0.2% in June after an upwardly revised 0.1% decline a month earlier.

In the 12 months to June, import prices increased 1.5%. That was the smallest gain since last November and followed May’s 2.3% increase.

The year-on-year increase in import prices has slowed sharply since posting 4.7% in February, which was the biggest advance in five years.

US financial markets were little moved by the report, which came on the heels of data last week showing consumer prices were unchanged in June and the annual consumer price index rate increased 1.6% — the smallest rise since October 2016.

Low oil prices are largely curbing both domestic and imported inflation pressures. Other factors such as declining prices for mobile phone services have also contributed to pushing inflation below the Federal Reserve’s 2% target.

Federal Reserve chairwoman Janet Yellen told legislators last week that the recent ebb in inflation was partly the result of “a few unusual reductions in certain categories of prices”, which would eventually drop out of the calculation.

Persistently low inflation will probably have an effect on the timing of the Fed’s third interest rate increase in 2017, which most economists expect will be in December.

In June, prices for imported petroleum fell 2.2% after decreasing 1.2% in May. These prices have not risen since gaining 0.8% in February.

Import prices excluding petroleum edged up 0.1% after being unchanged the prior month, and rose 1.4% in the 12 months to June.

Prices for imported capital goods rose 0.2%, the largest increase since May 2014. Imported motor vehicle prices fell 0.2%, while the cost of imported food increased 0.9%.

The report showed export prices dropped 0.2% in June as falling vegetable, soya bean and fruit prices weighed on agricultural exports.

They rose a modest 0.6% year on year, the smallest gain since prices started climbing in December, curbed by lower prices for soya beans, fruit and maize.

Export prices fell 0.5% in May and gained 1.5% in the 12 months to May.