Consumer prices up 0.5% in June on gas hike

By Martin Crutsinger, AP Economics Writer

July 17, 2013

Overall prices have risen just 1.8% over the past 12 months. And core prices are up just 1.6% in that period — the smallest 12-month change in two years. Both measures are below the Fed’s 2% inflation target.

Slow economic growth and high unemployment have kept wages from rising quickly. That has made it harder for retailers and other firms to raise prices.

Tame inflation has helped consumer increase spending this year despite slow income growth and higher Social Security taxes.

In June, prices for all energy products rose 3.4% mostly because of the surge in gasoline costs. Beyond that, other prices were little changed.

Food prices ticked up 0.2%. New cars prices increased 0.3% but are up just 1.3% over the past year.
Clothing prices rose 0.9% in June but are up just 0.8% over the past 12 months. Prices for used cars fell
0.4% and are down 2.3% over the past year.

At its meeting in June, the Fed said it plans to keep the short-term interest rate it controls at a record low near zero until the unemployment rate falls below 6.5%, provided inflation remains under control. Unemployment is 7.6%.

The Fed also said it would continue purchasing $85 billion in mortgage and Treasury bonds each month. The purchases are intended to lower long-term rates and encourage more borrowing and spending.

Chairman Ben Bernanke is scheduled to deliver the Fed’s mid-year report to Congress on Wednesday and
Thursday this week. Investors will pay particularly close attention as Bernanke’s comments over the past month have caused markets to gyrate wildly.

After the June meeting, Bernanke said the Fed could slow the bond buying later this year and end it next year if the economy continued to strengthen. Stocks plunged. The Dow Jones industrial average lost 560 points in two days.

But since then, the chairman and other Fed officials have sought to calm investors. They have stressed that any pullback in the bond purchases depends on clear evidence of improvement the economy and job market— not a target date. And last week Bernanke told a conference in Boston that the economy still needs help from the Fed’s low interest rate policies.

Stocks surged. The Dow Jones industrial average and the Standard & Poor’s 500 stock index reached all-time highs.

Most analysts expect Bernanke to stick with last week’s message.

2 Comments on this post.

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  • jorge buesa
    17 July 2013 at 8:05 pm - Reply

    I think we should be careful, the economy will go down by the end of this year, the stocks will fall down by the end of year. People is playing with stocks because they want fast money short term not long term ! People will stop spending money by the end of the year.

  • delialusional
    18 July 2013 at 10:36 am - Reply

    It’s the END OF THE WORLD ! Rush at your local churches for your safety !

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