While U.S. consumer prices were only slightly up in July, but economists don’t expect low inflation to deter the Federal Reserve from raising interest rates later this year.
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Brian Murphy, head of lending at Mortgage Advice Bureau, a broker firm, said: “In June there were no shocks or surprises for homebuyers with annual house price growth increasing by just 0.1 percentage point from the 5.6% seen in April and May”. Food prices were up 0.2% on a monthly basis, but they were up 1.6% from a year earlier.
The Fed uses a different inflation measure based on personal consumption expenditures, which was up 0.3 percent for the 12 months through June 30, the latest available data.
In Scotland, prices dropped 0.6%.
Analysts believe the figure could still return to negative territory in the coming months as the fall in the price of oil works its way through the statistical system.
“Fed officials made clear that they do not need to see higher inflation before hiking”, RBS chief economist Michelle Girard said. The housing and utilities index increased by 3.1% between June 2015 and July 2015.
12-month rate edged up to 0.1% in July, the sixth successive month it has been at or around zero.
She said the start of rate increases will depend “critically on when there is more evidence” that inflation is heading toward the BoE’s 2% target. The next minutes could provide some telling insight on whether Carney’s vision of a gradual trot towards higher interest rates will in fact turn into a faster gallop, ‘ she says.
The 5.7% jump is more than twice as fast as average wages are growing.
The figure also saw a boost from an increase in transport costs, particularly air fares, despite continuing drops in the oil price.
Energy prices decreased 0.5 percent in July after jumping 3 percent in June.
An economic slowdown in China and Europe has also curtailed global demand, which can limit price increases.
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The Office for National Statistics (ONS) said the slight increase on last month’s rate was mainly driven by clothing prices, while food and fuel prices continued to fall.
