Inflation seen taking longer to reach Fed goal on unchanged CPI

Washington - Little change in the US cost of living in June signals inflation may take even longer to reach the Federal Reserve’s goal, a Labour Department report showed on Friday.

Highlights of Consumer-Price Index (June)

The consumer-price  index was unchanged (forecast was for 0.1% rise) following a 0.1% decline the prior month.

From a year earlier, prices  were up 1.6% (forecast was 1.7%), the smallest advance since October, after a 1.9% gain.

Excluding food and energy, the so-called core CPI rose 0.1% for a third straight month (forecast was 0.2%); it was up 1.7% from June 2016. Smaller-than-forecast advance in core prices included drops in airfares, new and used vehicles, wireless phone services

Key takeaways

Core consumer inflation last accelerated in January, on a year-over-year basis. In June, the smaller-than-forecast monthly advance reflected declines that extended beyond just a few categories. Household furnishings, clothing and hotel stays were also cheaper last month.

The report indicates inflation may remain stuck below the goal of Fed policy makers for a longer period of time, is a bit broader in scope and underscores concerns of some central bankers about additional rate increases.

The Fed’s preferred gauge of inflation, a separate figure based on what consumers purchase, has exceeded its 2% goal only once since April 2012, though some Fed officials focus on the measure excluding food and energy, which is still below their target.

Other details

Energy prices fell 1.6% from previous month; food costs little changed. The CPI for new vehicles fell 0.3%; air fares declined 2.7%.

Shelter costs rose 0.2%, with a 0.3% increase in owners-equivalent rent, one of the categories designed to track rental prices; price of lodging away from home dropped 1.9%.

Expenses for medical care rose 0.4%, most since August; these readings often vary from results for this category within the Fed’s preferred measure of inflation due to different methodologies.

The CPI is the broadest of three price gauges from the Labour Department because it includes all goods and services. About 60% of the index covers the prices that consumers pay for services ranging from medical visits to airline fares, movie tickets and rents.

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