Inflation slowed in July, according to figures released by the Bureau of Economic Analysis Friday.
The price index for personal consumption expenditures showed prices rising at 0.3 percent annually through July, the same as in June. The month-to-month change was 0.1 percent, below investors’ expectations and last month’s reading.
Stripping out food and energy costs, inflation was 1.2 percent, down from 1.3 percent. Excluding those volatile elements provides a measure of “core inflation” that policymakers believe is more predictive of future inflation.
Friday’s release showing declining core inflation defies the Federal Reserve’s expectations for inflation to tick up over the course of the year.
The central bank has a 2 percent target for long-term inflation.
That target is based on the Personal Consumption Expenditures index updated Friday, not the more commonly cited Consumer Price Index.
The CPI generally runs slightly higher. In July, core inflation was 1.8 percent in the CPI.
In its latest monetary policy statement, the Fed said that it “expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of earlier declines in energy and import prices dissipate.”
That phenomenon has yet to develop, even as the Fed considers raising rates to tighten monetary policy for the first time since 2006.
Federal Reserve officials are meeting this weekend at a conference in Jackson Hole, Wyo., exploring why inflation has remained low in many advanced economies throughout the recovery from the global financial crisis.
