Washington (Reuters)-U.S. consumer prices rose to their highest level in nearly eight years in June as companies reopened, but underlying trends suggest that inflation will remain silent and the Fed will continue to inject troubled economies funds.
FILE PHOTO: A shop owner works in his retail store because the first phase of New York City reopens during the outbreak of Coronavirus Disease (COVID-19) in Brooklyn, New York City, USA on June 9, 2020 . REUTERS/Shannon Stapleton/File Photo
The Ministry of Labor said on Tuesday that the consumer price index rose 0.6% last month, the largest increase since August 2012, and fell 0.1% in May. Gasoline and food prices have pushed gasoline prices down for three consecutive months.
In the 12 months to June, CPI rose 0.6%, and in May it rose 0.1%, which is the smallest year-on-year increase since September 2015.
Economists surveyed by Reuters had expected CPI to increase by 0.5% in June, a year-on-year increase of 0.6%.
After closing in mid-March to slow down the spread of COVID-19, the company has reopened. But in most parts of the country, new cases of respiratory diseases have proliferated, prompting some states to call back or suspend business.
The economy fell into recession in February.
The Fed is injecting funds into the economy through unconventional measures, including large-scale asset purchases and loans to businesses. In addition, the government provided nearly $3 trillion in fiscal stimulus packages, which contributed to the monthly budget deficit in June.
There have been concerns that unprecedented stimulus measures may trigger inflation. However, with a record 33 million people enjoying unemployment benefits, economists expect inflation to remain benign.
Excluding fluctuations in food and energy, the CPI fell by 0.1% in May and rose by 0.2% in June. The increase in clothing and healthcare costs was offset by the easing of inflation in rents.
Since the series began in 1957, the so-called core CPI has declined for three consecutive months. In the 12 months to June, the core CPI increased by 1.2%, which was the same as the increase in May.
The Fed tracks its core personal consumption expenditure (PCE) price index for its 2% inflation target. The core PCE price index increased by 1.0% year-on-year in May, the smallest increase since December 2010. The core PCE price index data for June will be released at the end of this month.
Reporting by Lucia Mutikani; Editing by Andrew Heavens and Andrea Ricci