Consumer Prices Barely Increased During July --- Rise of 0.1% Is Reassuring To Economists About Fed's Stance on Rates
WASHINGTON -- Consumer price increases have slowed sharply, helping reassure economists that a boost in short-term interest rates isn't imminent.</br></br>After a worrisome rise in prices in the first four months of the year, recent evidence suggests inflation is again in check. The Labor Department said its consumer price index rose a tiny 0.1% in July. The index didn't change in June and increased only 0.1% in May.</br></br>Analysts have been watching closely for signs of problem inflation for a hint as to whether the Federal Reserve will raise short-term interest rates. Most have been encouraged that the recent spate of good pricing news, coupled with signs that the economy is growing slowly, will keep the Fed's hands off the interest-rate lever.</br></br>The consumer price report comes on top of other encouraging inflation news. Producer prices in July fell, labor costs rose at a slow pace and a report on manufacturers suggested that inflation pressures were diminishing in the industrial sector as well.</br></br>"This enhances the feeling that a surge in prices at the beginning of the year was seasonal" and couldn't be sustained because of sluggish economic activity, said Samuel Kahan, chief economist of Fuji Securities in Chicago.