US Inflation Eases in July

Officials of the U.S. Federal Reserve are watching inflation and the U.S. job market closely as they decide when and how quickly to raise interest rates.

In a report, the United Kingdom Office for National Statistics said the rate of consumer price inflation inched up by a seasonally adjusted 0.1% last month, up from a flat reading in June.

Meanwhile, the CPI for the first seven months of 2015 also registered an increase of 1.7 percent, as compared to the same period past year, led by increases among the main groups with high weights.

Consumer prices were up 0.2 percent annually through the month, following a slightly lower-than-expected monthly gain of 0.1 percent.

AIER’s Everyday Price Index (EPI) was unchanged in July after increasing 0.8 percent in June.

The Federal Reserve’s target for price stability is 2.0 percent inflation over the longer term.

With food and energy excluded, prices in the Denver-Boulder-Greeley region rose 3.2 percent from mid-2014 to mid-2015. Gasoline prices have fallen 22.3 percent over the past 12 months.

Analysts believe the figure could still return to negative territory in the coming months as the fall in the price of oil works its way through the statistical system. July’s increase in the CPI was a slowdown from the 0.3 percent gain in June. She notes, for example, that West Texas crude is now off 56% from a year ago, gold has fallen by 15% over the last 12 months, copper is down 27%, and sugar has slipped by close to 35% in the past year.

Low inflation has provided consumers with greater purchasing power in recent months, thanks in large part to the collapse in the price of oil over the past year. “Fundamentally, the inflation outlook is still too weak to merit raising interest rates this year”.

It was a small rise on May’s house prices increase, which was at 5.6%.

And energy prices have begun rising again.

“Since the end of 2012, every Fed communication has continued to acknowledge the sub-standard level of inflation which continues to persist”, she said. Housing inflation continued to rise in June to 6.5% y/y, though pressure appears to be waning in Q2.