Modest US price rises could delay Fed hike

US CONSUMER prices increased slightly in July as rising food costs were offset by falling prices for a range of other goods, pointing to benign inflation that could make the Federal Reserve cautious about raising interest rates again this year.

The Labor Department said on Friday its Consumer Price Index edged up 0.1 per cent last month after being unchanged in June. That lifted the year-on-year increase in the CPI to 1.7 per cent from 1.6 per cent in June.

Economists polled by Reuters had forecast the CPI rising 0.2 per cent in July and climbing 1.8 per cent year-on-year.

Stripping out the volatile food and energy components, consumer prices gained 0.1 per cent for the fourth straight month. The so-called core CPI rose 1.7 per cent in the 12 months through July and has now increased by that margin for three straight months.

The modest gain in consumer prices, coming on the heels of a drop in producer prices in July, could worry Fed officials who have largely viewed the retreat in inflation as temporary.

Fed chair Janet Yellen told lawmakers last month that “some special factors,” including prices for mobile phone plans and prescription drugs, were partly responsible for the low inflation readings.

Prices of US government debt rose after Friday’s data.