Consumer Price Index data for the U.S. was released today , rising more than expected in July, signalling that the cost of living in the country climbed by the most in four months, led by higher energy and food prices.
The CPI index, which measures the change in the price of goods and services purchased by consumers, excluding food and energy, increased 0.5 percent from June, which was more than twice the 0.2 percent forecast by economists.
Meanwhile, the core CPI, which is a so-called core gauge, which excludes volatile food and fuel costs, rose 0.2 percent.
Analysts say that some businesses are trying to preserve profits by recouping higher commodity costs from earlier this year, passing on the costs to the consumer through higher prices. However it is expected that inflation will steady and become more moderate as the labour market is weak and growth is slow, so pricing power should weaken eventually.
Last week the Federal Reserve said that longer term inflation is projected to settle “at or below” its goal.
With the economic recovery showing signs of stress, the Fed pledged to keep its benchmark interest rate at a record low at least through mid-2013 and said it is “prepared to employ” policy tools to promote growth.
The Fed’s informal target range for longer-term core inflation is 1.7 percent to 2 percent. Overall consumer prices increased 3.6 percent in the 12 months ended July, matching the year-over-year gain the prior month. The core CPI rose 1.8 percent from July 2010, more than the median forecast of a 1.7 percent increase and following a 1.6 percent gain in the 12 months to June.