Inflation Comes In Lower Than Expected

The cost of living in the United States rose by less than expected in July, a Labor Department report showed Friday.

The Labor Department’s consumer price index rose 0.1 percent compared to the previous month, less than the o.2 percent median forecast of economists. On an annual basis, prices rose 1.7 percent, below the forecast of 1.8 percent.

Core inflation, which excludes the more volatile food and energy components of the index, rose 0.1 percent. That was less than the 0.2 percent expected. Year-over-year, core prices were up 1.7 percent, in line with expectations.

The continued slowdown in inflation challenges the Fed’s view that lower-than-expected inflation would be “transitory.” It could make it harder for the Fed to continue its plan to raise interest rates later this year.

The Fed targets 2 percent inflation but does not rely on the Labor Department numbers. It used a Commerce Department price index that will be updated at the end of August.