US inflation slows in July

US consumer price index increases by only 0.1 percent last month

Photo by: Reuters
Photo by: Reuters

Prices are seen on replica Statues of Liberty figures in a shop window in New York City, November 14, 2011

US consumer prices rose slightly in July as gasoline and food prices increased marginally, but a solid gain in shelter costs suggested inflation pressures were stabilizing enough to support expectations of an interest rate hike this year.

The Labor Department said on Wednesday its Consumer Price Index edged up 0.1 percent last month after advancing 0.3 percent in June, marking the sixth straight month of increases.

In the 12-months through July, the CPI climbed 0.2 percent.

It was the second month the annual CPI increased after plunging crude oil prices pushed it into negative terrain in January.

Signs of an ebb in the disinflationary trend, combined with a tightening labor market and strengthening housing sector could give the Federal Reserve confidence that inflation will eventually rise toward its 2 percent target.

The US central bank is expected to raise its short-term interest rate next month. But given that inflation will likely remain tame because of a strong dollar, renewed weakness in oil and commodity prices, as well as China's devaluation of the yuan, the pace of monetary policy tightening is likely to be gradual.

Economists polled by Reuters had forecast the CPI rising 0.2 percent from June and gaining 0.2 percent from a year ago.

The so-called core CPI, which strips out food and energy costs, ticked up 0.1 percent last month after rising 0.2 percent in June. Shelter, which recorded its biggest increase in nearly 8-1/2 years, was the main contributor to last month's rise in the core CPI.

In the 12 months through July, the core CPI increased 1.8 percent. It was the fourth time in five months that the 12-month change was 1.8 percent.