Cheaper gas, wireless plans keep US inflation in check
Posted July 14, 2017 5:34 am.
Last Updated July 14, 2017 6:00 am.
This article is more than 5 years old.
WASHINGTON – Lower costs for gas, airline tickets, new and used cars and wireless mobile phone plans kept U.S. consumer prices flat in June, evidence that inflation remains muted.
The unchanged reading followed a drop of 0.1 per cent in May, the Labor Department said Friday. Inflation has climbed just 1.6 per cent from a year ago. That’s down sharply from February, when prices rose 2.7 per cent from a year earlier.
Excluding the volatile food and energy categories, prices rose 0.1 per cent in June and 1.7 per cent from a year earlier.
As inflation has slowed, the Federal Reserve’s plans to raise interest rates once more this year and three times next year have come under greater scrutiny. The Fed typically hikes rates to ward off rising inflation, yet price gains have declined this year.
Fed policymakers have lifted their benchmark short-term rate four times in the past 18 months.
Federal Reserve Chair Janet Yellen hinted on Wednesday that the Fed could slow its rate hike plans if inflation continues to run below the Fed’s 2 per cent target. That caused a rally in the stock markets as investors celebrated the prospect of lower interest rates for longer.
Yet on Thursday, in a second day of testimony before Congress, Yellen sought to clarify those views and said it would be “premature” to conclude that inflation will remain weak. Fed officials have previously cited big drops in the cost of wireless communications plans as a temporary factor holding down prices.
On Thursday, Yellen said the low unemployment rate would likely force employers to raise pay to attract and keep workers, which in turn should push up prices.
The measure of wireless phone costs fell 0.8 per cent in June and is down 13.2 per cent in the past year. That mostly reflects new unlimited data plans. The government records additional goods or services for the same price as the equivalent of a drop in price.
Gas prices fell 2.8 per cent in June, after a 6.4 per cent fall in May. Electricity costs slid 0.6 per cent.
