Economy Cheaper gas keeps U.S. consumer prices flat Hiring has slowed, but inflation is not a problem

By Christopher S. Rugaber

AP Economics Writer

WASHINGTON (AP) -- Consumer prices were unchanged in June, held down by cheaper gas. Outside the volatile food and energy categories, inflation was mild.

The Labor Department said Tuesday that gas prices fell in June by a seasonally adjusted 2 percent, the third straight decline. Food prices edged up 0.2 percent after a flat reading in May.

Outside the volatile food and energy categories, so-called "core" prices rose 0.2 percent last month. It was the fourth straight increase of that size.

The flat reading on overall prices comes after the consumer price index fell 0.3 percent in May and was unchanged in April.

Mild price increases leave consumers with more money to spend, which spurs more growth. Lower inflation also gives the Federal Reserve room to launch new programs intended to boost the economy.

The inflation report comes as Fed Chairman Ben Bernanke kicks off two days of testimony on Capitol Hill. He appeared before the Senate Banking Committee Tuesday and will appear before a House panel Wednesday. His remarks will be watched for any hints that the Fed is preparing to take further action to try to accelerate growth.

At its June 19-20 policy meeting, the Fed agreed to extend a program that alters its bond portfolio to try to lower long-term interest rates. The aim is to inspire more borrowing and spending. And minutes of that meeting show a growing number of members are open to adopting further stimulus measures, such as launching another round of bond buying. But policymakers are at odds over whether the economy needs more help now.

Hiring has slowed sharply after a fast start to the year. And a report Monday said Americans spent less at retail businesses for a third straight month in June.

But inflation, at least, isn't a problem. If the Fed were worried that prices are rising too fast, it might have to raise interest rates.

In the 12 months that ended in May, consumer prices rose 1.7 percent, much lower than the 12-month increase of 2.3 percent in April.

Published: Wed, Jul 18, 2012

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