INFLATION MISSES FED´S 2% TARGET FOR 38TH STRAIGHT MONTH / THE WALL STREET JOURNAL

 

August 3, 2015, 8:40 AM ET

Inflation Misses Fed’s 2% Target for 38th Straight Month

By Josh Mitchell

The Federal Reserve in Washington.

SAMUEL CORUM/ANADOLU AGENCY/GETTY IMAGES

The latest inflation figures aren’t making the Federal Reserve’s job any easier.

Consumer-price growth has been running below the Fed’s 2% target for three years, and June was yet another month of weakness, the Commerce Department said Monday.

The price index for personal-consumption expenditures, the Fed’s preferred inflation measure, rose 0.2% in June from a month earlier, the Commerce Department said. From a year earlier, prices were up just 0.3%.

That’s far below the 2% target that the Fed believes would be indicative of stability and healthy economic growth. Inflation has run below the Fed’s target for 38 consecutive months.

Core prices, which exclude volatile food and energy costs, ticked up 0.1% from a month earlier and 1.3% from a year ago. Economists surveyed by The Wall Street Journal had expected core prices to climb 0.1% in June from a year earlier.

Sluggish growth in the U.S, weak overseas economies and depressed oil prices are behind the low inflation numbers.

The persistently low inflation rate is weighing on Fed officials as they debate when to raise short-term interest rates. The Fed has indicated it could start to lift rates as early as September, but officials have said they want to be confident that inflation is headed toward its objective.

Overall inflation has risen in recent months, though barely. The 0.3% year-over-year gain in overall prices in June followed a 0.2% increase in May and a 0.1% increase in April. Core inflation, meanwhile, has been locked in at 1.3% for six months.

In a statement following a two-day meeting last week, the Fed said it believed continues to run low in part because of “earlier declines in energy prices and decreasing prices of non-energy imports.”

“Inflation is anticipated to remain near its recent low level in the near term, but the committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of earlier declines in energy and import prices dissipate,” the Fed said.