Inflation Pace Slowed In June; CPI Up 0.2%;Rise Is Smallest in More Than a Year
The surge in food and energy prices that sent the nation's inflation rate up sharply earlier this year halted last month as consumer prices rose only 0.2 percent, the smallest increase in more than a year, the Labor Department reported yesterday.</br></br>Even so, the consumer price index has increased at an annual rate of 5.9 percent over the past six months, compared to increases of 4.4 percent for both 1987 and 1988.</br></br>Stock and bond markets rallied on the inflation news, which was better than most analysts had been expecting. {See story, Page F3.}</br></br>Short-term interest rates also fell as most investors concluded that the positive news about consumer prices would give the Federal Reserve more room to pump cash into the economy without making inflation worse. The central bank began early last month to reduce interest rates to keep a slowdown in the economic growth from turning into a recession. The slowdown is largely the result of earlier interest rate hikes engineered by the Fed to keep inflation in check.</br></br>At the White House, Michael Boskin, chairman of the president's Council of Economic Advisers, called the June inflation figure "very good news." Boskin said that since the higher inflation rate earlier this year was attributable to "very special factors" involving agriculture and energy, once those factors disappear, "that's going to mean the overall index will be more moderate."