US TIPS breakeven rates dip after July CPI data

19 Aug 2015 | Author: | No comments yet »

U.S. Consumer Prices Rise for Sixth Straight Month.

The consumer-price index, which reflects what Americans pay for everything from razors to rent, rose a seasonally adjusted 0.1% in July from a month earlier, the Labor Department said Wednesday.WASHINGTON: U.S. consumer prices rose slightly in July, but a solid increase in the cost of shelter suggested inflation was probably stabilizing enough to support expectations the Federal Reserve will raise interest rates this year.

That is a small increase but marks the second straight month of year-over-year price gains after the annual index failed to advance from January through May. The solidified core index could give Federal Reserve policy makers confidence that inflation has stabilized in deciding when to begin raising interest rates for the first time since 2006. “Inflation was somewhat weaker than expected in July on a monthly basis, but that should not deter [the Fed] from raising the federal funds target rate when it meets in mid-September,” said Stuart Hoffman economist at PNC Financial Services Group. Inflation “has picked up somewhat over the past few months.” The Fed is looking for inflation to firm gradually as it considers when to raise short-term interest rates. The Fed’s preferred inflation gauge, the price index for personal consumption expenditures, has undershot the central bank’s 2% target for three years. But the pace of monetary tightening is likely to be gradual given the dampening effect on inflation of a strong dollar, renewed weakness in oil and other commodity prices, and China’s devaluation of the yuan, which should push down import prices.

A year later, gasoline costs may be stabilizing, peaking for the summer in mid-July at $2.92 for a gallon of regular and declining modestly since then, according to the U.S.

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