Consumer prices rise 0.3 percent in August
By MARTIN CRUTSINGER
AP Economics Writer
WASHINGTON (AP) — Consumer prices posted a small rise in August, but outside
of a big jump in volatile gasoline prices, inflation was essentially flat.
Consumer prices edged up 0.3 percent in August, matching the July increase, the
Labor Department said Friday. Core inflation, which excludes food and energy,
showed no increase in August.
The 2007-2009 recession and the weak recovery since have banished inflation as
an immediate threat. Sluggish demand is preventing most businesses from raising
prices and high unemployment is keeping a lid on wage pressures.
Over the past 12 months, core inflation is up just 0.9 percent, matching the
lowest 12-month gain in 44 years. Overall prices are up a modest 1.1 percent
during the past 12 months.
The absence of inflationary pressures has given the Federal Reserve room to
keep interest rates at record lows for nearly two years in an effort to
jump-start economic activity. Fed policymakers meet again on Tuesday and are
expected to keep their target for the federal funds rate at zero to 0.25
percent, where it has been since December 2008.
The August and July increases followed three straight months of price declines.
Those declines had raised concerns that the country could be facing a threat of
deflation, something that has not been a problem in the United States since the
Great Depression of the 1930s.
However, with overall prices rising again and the economy posting signs of
emerging from its summer swoon, worries about deflation have decreased.
For August, energy prices rose 2.3 percent following a 2.6 percent July
increase. Both gains had followed three straight months of energy price
declines. In the past two months, gasoline prices have been increasing and were
up 3.9 percent in August.
Food costs rose 0.2 percent in August after having fallen 0.1 percent in July.
Last month, prices of meat, poultry, fish and eggs were down. The cost of
fruits and vegetables increased.
Outside of food and energy, clothing costs dropped 0.1 percent and airline
fares were down 0.1 percent with the weak economy keeping inflation at bay in
most areas.
Federal Reserve Chairman Ben Bernanke has said the Fed is prepared to take
additional steps to boost growth if the economy deteriorates further. The Fed’s
most likely option would be to buy large amounts of government securities to
drive down interest rates on mortgages and other types of consumer and business
loans.