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Key US inflation measure remains tame in July

WASHINGTON: US inflation remained tame in July as the continued decline in energy prices dampened price pressures, a

Aug 30 2019

WASHINGTON: US inflation remained tame in July as the continued decline in energy prices dampened price pressures, according to official data released on Friday.

The report also confirms American consumers are supporting the economy with rising spending.

The US Federal Reserve's preferred inflation measure rose 0.2 percent compared to June, in line with the consensus forecast among economists, the Commerce Department reported.

The increase in the "core" Personal Consumption Expenditures price index, which excludes volatile food and energy prices, was the same.

Many economists are convinced the Fed will cut the benchmark interest rate again next month to provide a dose of stimulus to the economy as inflation has remained well below the two percent target.

Compared to July 2018, the index rose 1.4 percent, just a tenth faster than the prior month, while the core inflation measure increased 1.6 percent year-over-year.

Even though August costs for energy goods and services were more expensive compared to June, rebounding 1.4 percent, they were still 2.1 percent below their level of a year ago.

Goods prices rose 0.2 percent in month, it fell 0.5 percent from a year earlier.

Meanwhile, spending surged 0.6 percent compared to the previous month, even as personal income rose just 0.1 percent, slowing sharply from the gains in the prior four months.

"While this provides reassurance that the US growth engine keeps humming along, we expect some moderation in consumer outlays amid fading fiscal stimulus and renewed financial market volatility," Gregory Daco of Oxford Economics said in an analysis.

As PCE price gains surpassed the Fed's target last year, it raised interest rates four times.

But inflation has been softening since last year and policymakers earlier this month cut the policy lending rate for the first time in more than a decade.

"The persistent inflation undershoot of the Fed's 2 percent target along with concerning weakness in business investment and trade bolster the case for additional Fed easing," Daco said, noting he expects three more rate cuts before year-end.

Copyright AFP (Agence France-Press), 2019