United States consumer prices barely rose last month, the latest sign that slow economic growth is keeping inflation tame, The Associated Press reported on Tuesday.
The consumer price index increased just 0.1 per cent in August, the Labour Department said Tuesday, after a 0.2 per cent increase in July.
Excluding volatile food and energy costs, core prices also rose just 0.1 percent.
In the past 12 months, prices have risen 1.5 per ent. That’s down from the two per cent year-over-year gain in July and below the Federal Reserve’s two per cent inflation target. Core prices are 1.8 per cent higher than a year ago, the largest 12-month gain since March.
The increase in core prices could help persuade the Fed to start pulling back on its low interest rate policies. But significantly lower inflation would pressure the Fed to keep stimulating the economy.
Most economists expect that the Fed will begin to reduce its bond buying by about $10bn on Wednesday, according to a survey by The Associated Press.
The bond purchases are intended to lower longer-term interest rates and encourage more borrowing and spending. Fed Chairman, Ben Bernanke, first signaled in late May that the Fed could begin slowing its purchases before the end of the year.
On Tuesday, many economists stuck with that predicting after seeing the report on consumer prices.
“We don’t think this will prevent the Fed from tapering … the danger of very low core inflation has passed,” Paul Dales, an economist at Capital Economics, said in an email to clients.
Falling apartment vacancy rates will likely keep pushing rents higher, Dales said, and higher cotton costs should also lead to higher clothing prices. Last month, the cost of renting an apartment or home rose 0.4 per cent, the most in 10 months.