In this July 31, 2013 photo, back-to school fashions are displayed at JC Penney in New York. The government reports on consumer prices for August on Tuesday, Sept 17, 2013. (AP Photo/Mark Lennihan)
WASHINGTON — U.S. consumer prices barely rose last month, the latest sign that slow economic growth is keeping inflation tame.
The consumer price index increased just 0.1 percent in August, the Labor Department said today, after a 0.2 percent 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 percent. That’s down from the 2 percent year-over-year gain in July and below the Federal Reserve’s 2 percent inflation target. Core prices are 1.8 percent 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 $10 billion 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.
Today, 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.