July’s Consumer Price Index

The Labor Department’s headline Consumer Price Index was unchanged for the month of July, after rising a robust .7% in June.  Falling food and energy prices led to the stasis, and also help explain why the core CPI, which excludes both of these categories, managed to muster a slight .1% gain.  Year-over-year the headline number is now contracting at a negative 1.9%, picking up a bit of momentum relative to June’s 1.7% drop.  The annualized core rate also came down, off just .1% from June, to a positive 1.6% seasonally adjusted.  The weak headline number probably encourages the Federal Reserve to maintain their quantitative easing regime.  The declining core rate, even while staying within the desired target range the Fed has described of 1% to 2% growth, points to an economy that remains weak, thereby encouraging the current low federal funds interest rate to stay somewhere between zero and 1/4%.