US consumer prices edge up 0.1 percent in July

U.S. consumer prices rose slightly in July, but a solid increase in the cost of shelter suggested inflation was probably stabilizing enough to support expectations the Federal Reserve will raise interest rates this year.

Richard Campbell, ONS head of CPI, said: “This is the sixth month running that headline inflation has been at or very close to zero”.

Other, smaller contributors were the price rises in transport services (particularly air fares), recreation and culture (notably computer games and consoles) and bank or overdraft charges.

Signs of an improving economy, including a tightening labor market and firming housing sector, where prices are on the rise, should give the Fed confidence that inflation will gradually move toward its 2% target, Reuters said.

The Federal Reserve is reasonably pleased with employment and somewhat comfortable with growth but there are serious questions about inflation.

“Today’s numbers will increase speculation over a rate rise later this year”. Over Jan-Jul the CPI grew by 3.7% year-on-year. London’s FTSE 100 shed 0.45%, the EURO STOXX 50 declined 0.35%, France’s CAC 40 slumped 0.45%, while Germany’s DAX dropped 0.3%.

Also, food prices rose 1.5 percent locally, with costs for food at restaurants up 2.9 percent and prices for food consumed at home up 0.9 percent. But from a year earlier, gasoline prices are down 22.3 per cent.

Falling oil and gas prices, however, offset much of those increases elsewhere.

For July, airline fares dropped 5.6 percent, the biggest decline since a 6.8 percent plunge in December 1995.

Consumer prices advanced 0.1% in July from a year ago , while they were expected to remain flat as seen in June.

A stronger US dollar could be playing a role in holding back consumer prices by making imported goods relatively more affordable. While rent inflation rose to its highest pace in over six years in June to 6.5% y/y, upward price pressures in the last three months have diminished significantly. Economists expected a 0.2% rise.

The deterioration of demands not only in the US but also in China and Europe is considered as one of the main driving force in stopping inflation.