Consumer prices rose modestly in July, a sign inflation remains in check as the Federal Reserve winds down its bond-buying program. The price index for personal consumption expenditures–the Fed’s preferred inflation measure–increased 1.6% in July from a year earlier, the Commerce Department said Friday. Excluding volatile food and energy prices, so-called core prices climbed 1.5% year over year.
Both overall and core prices rose at the same annual pace in July as they did in June, suggesting inflation pressures remained at bay. Compared to a month earlier, each measure was up just 0.1%. Inflation continues to run below the 2% target the Fed sets as a gauge of price stability and healthy growth. The PCE price index has run below 2% for 27 consecutive months.
Still, prices have picked up since the start of the year, and the Fed projects they’ll steadily climb toward its target by the end of 2015. As recently as February, the index showed prices growing at just 1% year over year.
A separate measure also shows inflation in check. The Labor Department’s consumer-price index rose 2% in July from a month earlier. In May and June, the index had risen 2.1% year over year.
The CPI historically runs about half a percentage point higher than the PCE price index, which employs different statistical methods.
(Source: WSJ, BLS)