By Martin Crutsinger
WASHINGTON: Higher gasoline costs pushed a measure of U.S. consumer prices up in June. But the overall trend in inflation stayed tame.
The Labor Department said Tuesday that the consumer price index increased 0.5 percent in June from May. Two-thirds of the increase came from a 6.3 percent jump in gas prices, the largest since February.
Excluding volatile food and energy costs, so-called core prices rose just 0.2 percent.
Consumer prices have been stable this year, allowing the Federal Reserve room to continue efforts to stimulate the economy.
Overall prices have risen just 1.8 percent over the past 12 months. And core prices are up just 1.6 percent in that period — the smallest 12-month change in two years. Both measures are below the Fed’s 2 percent 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 percent mostly because of the surge in gasoline costs. Beyond that, other prices were little changed.
The gas price surge was driven by a jump in global oil prices, which reflected in part the political turmoil in Egypt. Chris G. Christopher Jr., director of consumer economics at Global Insight, said pump prices are likely fall once conditions stabilize in Egypt.
Food prices ticked up 0.2 percent. New cars prices increased 0.3 percent but are up just 1.3 percent over the past year. Clothing prices rose 0.9 percent in June but are up just 0.8 percent over the past 12 months. Prices for used cars fell 0.4 percent and are down 2.3 percent 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 percent, provided inflation remains under control. Unemployment is 7.6 percent.
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 today and Thursday. 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.
Most analysts expect Bernanke to stick with last week’s message.