US inflation rises moderately, consumer spending cools

WASHINGTON: US prices increased moderately in June as the declining cost of goods tempered a rise in the cost of services, underscoring an improving inflation environment that could position the Federal Reserve to begin cutting interest rates in September.

The report from the Commerce Department on Friday also showed consumer spending slowed last month. Signs of easing price pressures and cooling demand could boost the confidence of Fed officials that inflation is moving toward the US central bank’s 2.0 per cent target.

“Inflation continues to moderate and is slowing approaching the Fed’s target,” said Jeffrey Roach, chief economist at LPL Financial. “At the upcoming meeting, we should expect the Fed to highlight the slowdown in hiring as one reason to cut rates at the September meeting.”The Fed will hold its next policy meeting on July 30-31.

The personal consumption expenditures (PCE) price index nudged up 0.1 per cent last month after being unchanged in May, the Commerce Department’s Bureau of Economic Analysis reported. Goods prices dropped 0.2 per cent after falling 0.4 per cent in May.

Prices for motor vehicles and parts declined 0.6 per cent. Furnishings and durable household equipment prices dropped for a third straight month, but the cost of other long-lasting manufactured goods rebounded 1.8 per cent.

Prices for gasoline and other energy goods decreased 3.5 per cent after falling 3.4 per cent in May. Clothing and footwear were cheaper for a second straight month.But the cost of services increased 0.2 per cent, matching May’s gain. There were increases in the costs of housing and utilities, though the pace slowed from prior months.