(Bloomberg) — The Federal Reserve’s goal to spur economic growth enough to generate stronger inflation will probably take longer to achieve.
The consumer price index climbed 0.1 percent in July, the smallest advance in three months, after a 0.3 percent gain in June, a Labor Department report showed Wednesday in Washington. Costs over the past 12 months increased 0.2 percent.
A plunge in commodities and a stronger dollar will keep a lid on costs for goods such as clothing and electronics, making the Fed’s inflation target even more elusive. With rents among the only areas seeing sustained gains, the pickup in prices that began earlier this year is dissipating.
“The little bit of inflation uptick there had been is fading,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, who correctly forecast the increase in consumer prices. “It’s hard for policy makers to be reasonably confident that inflation is heading back toward that 2 percent target.”
Treasury securities rose as minutes from the Fed’s July meeting damped expectations for an interest-rate increase next month. The yield on the benchmark 10-year note fell to 2.11 percent at 3:30 p.m. in New York compared with 2.19 percent late on Tuesday.
Central bankers said last month that while conditions for raising interest rates were approaching, they needed more confidence inflation is moving toward their goal, according to meeting minutes.
The median forecast of 78 economists surveyed by Bloomberg forecast consumer prices would rise 0.2 percent. Projections ranged from a 0.1 percent decline to 0.3 percent increase.
The so-called core index, which excludes food and fuel, also climbed 0.1 percent in July following a 0.2 percent increase the prior month. That index was up 1.8 percent from July 2014.
Over the past three months, core prices also climbed at a 1.8 percent annualized rate. That’s down from a 2.6 percent annualized increase in the three months ended April, signaling emerging price pressures have subsided.
Higher prices for shelter, including rents and hotel rates, are helping prop up inflation, offsetting declines in a broad stretch of categories, including air fares, new and used cars and household furnishings.