Inflation in Check as Consumer Prices Barely Rise in July

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By Lucia Mutikani

WASHINGTON -- U.S. consumer prices barely rose in July as declining energy costs partially offset increases in food and rents, which could give the Federal Reserve ammunition to keep interest rates low for a while.

The Labor Department said Tuesday its Consumer Price Index edged up 0.1 percent last month after increasing 0.3 percent in June. In the 12 months through July, the CPI increased 2 percent after advancing 2.1 percent in June.

Inflation pushed up a bit from March through June, but labor market slack, marked by tepid wage growth, is keeping a lid on price pressures. That could add to the view that the U.S. central bank will be in no hurry to raise its benchmark interest rate.

The Fed targets 2 percent inflation and it tracks an index that is running even lower than the CPI.

The Fed last month said the risk of inflation running persistently below its target had diminished somewhat. It has kept its overnight lending rate near zero since December 2008 while nursing the economy back to health.

Last month's gain in consumer prices was in line with economists' expectations.

Energy prices fell broadly after rising in each of the last three months. Gasoline prices fell 0.3 percent last month after surging 3.3 percent in June. Food prices increased 0.4 percent after rising 0.1 percent in June. A drought in California is driving up food prices.

Stripping out food and energy prices, the so-called core CPI ticked up 0.1 percent after a similar gain in June. In the 12 months through July, the core CPI increased 1.9 percent after rising by the same margin in June.

The core CPI was held back by declining prices for used trucks and a plunge in airline fares. There was a moderate increase in the cost of prescription medication. Rents rose 0.3 percent in July and prices for new motor vehicles rebounded 0.3 percent.

Inflation in Check as Consumer Prices Barely Rise in July
For many employers, open enrollment season for some benefits happens in October. This usually sneaks up on some people, who scramble to decipher benefits and make elections last minute. Although you won't be able to see the options until the enrollment period opens, take time now to review your benefits. Are you taking advantage of any 401(k) matches? Are your fully funding your Flexible Spending Account? What about employer offered life and disability insurance? (A fun infographic from the Council for Disability Awareness shows your risks). Maximize your benefits and don't leave any money on the table.
Back-to-school time can be expensive if you're not prepared. Money is spent on clothes, books, supplies and technology -- and that's before the doors to the classroom have even opened. Before hitting the stores, do these two things:
  • Conduct an online search for "coupon code" along with the name of any store you'll be shopping at. Typically you can find some great online deals.
  • Get a list from you class or teacher of specific type of notebook, calculator, etc. required. If you can't get child's "must haves" from ahead of time, buy just the bare minimums until school starts and the list is available.
It's hard to think about the holidays when we're just making it through summer, but now is the time to build up a financial cushion. Set yourself up with an automatic transfer to a separate savings account and participate in the Holiday Fund Money Challenge to build up a savings of $450. How much do you need for the gifts, travel, parties, entertaining, food and other holiday activities you anticipate? Planning will help to ease the stress that comes around the holidays.
In lieu of scrambling at the end of the year to make contributions to retirement accounts by Dec. 31, double-check your contributions now and determine if there's room in your cash flow to allow for an increase to possibly max out by year end.
Summer is a typically a time of transitions. There are weddings, moves to new homes, possibly a new family addition and more. If summer is the time when these events take place, fall should be the time to take stock of how they're panning out. If you're recently married and haven't already, now is the time to have the money talk with your spouse and make decisions about spending plans, merging (or not merging) accounts, beneficiary updates and more. If you've moved, check out how the new location has affected your cost of living spending in terms of activities, gas costs, groceries and more. Ultimately with any transition, you need to review your spending plan and determine what areas (if any) need to be adjusted.
If you're lucky enough to live in one of the states that actually experiences seasons, fall is the time to prep for energy savings by caulking and weatherstripping doors and windows, turning your thermostat back for a fixed period each day and insulating your attic, basement or outside walls.
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