Consumer prices ticked up in July, the sixth-straight monthly increase, but the pace of growth slowed in what could be a worrisome sign for Federal Reserve officials as they consider hiking a benchmark interest rate.
The consumer price index increased 0.1% in July, down from a 0.3% rise the previous month, the Labor Department said Wednesday.
Growth in food and energy prices, which had driven the June increase, eased last month. Excluding those often-volatile elements, so-called core prices also were up just 0.1% in July.
Analysts had expected consumer prices and the core index to rise 0.2%.
A 5.6% decline in airline fares last month, the biggest decrease in 20 years, helped hold down overall consumer price growth, the Labor Department said.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said the drop in air fares probably would only be temporary. He noted that core inflation continues to rise slowly.
For the 12 months ended July 31, consumer prices increased 0.2%. Although the growth was small, it was up from the annual rate of 0.1% for the year through June and the third-straight month that the annual rate has increased.
Core prices were up 1.8% for the 12 months ended July 31, the same as the previous month.
Fed policymakers are watching inflation closely as they decide when to raise their short-term interest rate for the first time since 2006.
Though job growth has been solid in recent months, inflation has been running well below the central bank's target of 2%.
The Fed uses a different inflation measure based on personal consumption expenditures, which was up 0.3% for the 12 months ended June 30, the latest available data. Core inflation, using that barometer, was 1.3% for the same period.
But the consumer price index also is an important indicator of inflation.
August data is to be released on Sept. 16 as Fed officials gather for a two-day policy meeting during which many analysts expect them to raise the so-called federal funds rate. The rate has been near zero since late 2008.
Narayana Kocherlakota, president of the Federal Reserve Bank of Minneapolis, said Wednesday that it would be a mistake to raise the interest rate any time soon.
FOR THE RECORD:
2:32 p.m.: An earlier version of this article said Narayana Kocherlakota's comments were made on Thursday. His opinion column appeared on Wednesday.
A higher interest rate could damage the economic recovery and is not needed with inflation running so low, he said in an opinion column in the Wall Street Journal.
"The U.S. inflation outlook ... provides no justification for policy tightening at this juncture," said Kocherlakota, who believes inflation concerns should be secondary to promoting job growth.