This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Inflation Pressures Abate, at Least for Now

NEW YORK (TheStreet) -- Inflation pressures pulled back in June, allowing investors to push back fears of rising prices by at least another month.

The Bureau of Labor Statistics said Tuesday that consumer prices in June rose 0.1% from the prior month, undercutting economists' average forecast of a 0.3% increase. Prices climbed 1.9% in June 2013. 

"There's no question that we've seen inflation creep back in over the last six months. The point that I'm making is that these last two metrics we saw … on CPI and PPI, respectively, show a diminution in inflationary pressures at the core level, and that's what matters," Phil Orlando, chief equity strategist at Federated Investors, said in a phone interview from New York.

Orlando was referring to the core producer price index, a measure of cost increases for producers, which rose 0.2% in June from the prior month -- in line with economists' expectations -- as the year-over-year increase was 1.7%.

Gasoline costs in the June report posted the biggest gain since June 2013.

Market participants keep an eye on consumer prices because the Federal Reserve uses core inflation -- which excludes volatile gasoline and food prices -- as a key indicator to determine whether it must increase interest rates or keep them at historically low levels to cool down or heat up the economy.

Among economists, the question remains whether the U.S. economy is beginning to witness a real rise in inflation that should force the central bank to boost its benchmark interest rate.

"Overall, we still expect that a faster rise in core inflation will prompt the Fed to start hiking interest rates in March and force it to raise them further than widely expected," Paul Dales, senior U.S. economist at Capital Economics, wrote in a note to clients.

Fed Chair Janet Yellen has reiterated that the central bank won't raise the federal funds rate until a "significant" amount of time after it ends the economic stimulus program, but critics argued that if the core rate rises above the Fed's 2% objective then it will force the Fed to rein in rising prices amid a still-recovering economy.

However, Yellen last week told the Senate Banking Committee that she isn't worried about inflation because she said the country isn't to the point where a rise in wages could give way to a rise in inflation and she thinks that if inflation rises above 2% it won't peak much higher than that in the longer term.

-- Written by Joe Deaux in New York.

>Contact by Email.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $94.02 -2.67%
FB $104.07 -5.81%
GOOG $683.57 -3.45%
TSLA $162.60 -7.26%
YHOO $27.97 -4.05%


Chart of I:DJI
DOW 16,204.97 -211.61 -1.29%
S&P 500 1,880.05 -35.40 -1.85%
NASDAQ 4,363.1440 -146.4150 -3.25%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs