(Reuters) – U.S. consumer prices rose only slightly in July as airline fares recorded their biggest drop since 1995, but tame inflation pressures will probably not discourage the Federal Reserve from raising interest rates this year.
The Labor Department said on Wednesday its Consumer Price Index edged up 0.1 percent last month, with gasoline and food prices increasing marginally. July’s rise marked a sixth straight monthly increase.
While inflation remains soft, a strengthening economy, marked by a tightening labor market and a firming housing sector, should give the U.S. central bank confidence it will gradually move toward its 2 percent target, economists said.
“Fed officials made clear that they do not need to see higher inflation before hiking. They just need to have reasonable confidence it will return to mandate,” said Michelle Girard, chief economist at RBS in Stamford, Connecticut.