Falling gas prices kept consumer prices steady in the month of July, the Bureau of Labor Statistics reported Tuesday. On an annual basis, inflation drifted down from 1 percent to 0.8 percent.
Gas prices fell 5 percent just in the month and are now down nearly 20 percent on the year.
All energy prices are down 10 percent annually, while food prices have just barely picked up. Those small increases have limited inflation to the low 0.8 percent.
Setting aside food and energy prices, which can be volatile, “core” inflation ticked down one-tenth of a percentage point to 2.2 percent.
The Bureau’s Consumer Price Index is the most closely watched gauge of inflation.
Investors and policymakers at the Federal Reserve have been monitoring inflation numbers closely for signs that the economy is headed toward full capacity. The central bank is delaying tightening the money supply until it sees signs that inflation will hit its 2 percent target. Inflation has fallen short of that mark for years as the U.S. economy has faced deflationary pressures from abroad.
From the Fed’s perspective, headline inflation falling below 1 percent again is a step in the wrong direction, and a sign that there may be unused resources and underemployed workers.
“Low and slowing inflation is one reason why the Federal Open Market Committee will not raise the federal funds rate at its next meeting, on September 20 and 21,” PNC economist Gus Faucher wrote in response to Tuesday’s release.
From the viewpoint of consumers, however, low inflation is good news. It means that their dollars are going further, especially as they have had to pay less to fill up their vehicles with gas in recent months.
