The Consumer Price Index increased by 0.5 percent in June, the Bureau of Labor Statistics reported Tuesday, meaning that inflation gained for the second month after falling in March and April. Total CPI inflation has been 1.8 percent for the past 12 months.
Rising gas prices accounted for two-thirds of the month’s inflation, rising by 6.3 percent in June. Otherwise, prices rose modestly in most categories.
Core CPI, which excludes changes in the volatile prices of food and energy and economists think more accurately represents trends in inflation, rose 0.2 percent, for a total of just 1.6 percent over the past year.
Inflation is still running below the Federal Reserve’s preferred 2 percent rate. The Fed’s monetary policy committee has said that it will continue adding stimulus to the economy as long as unemployment remains high and inflation is below 2.5 percent. June’s overall 0.5 percent increase represents a slight uptick in month-to-month inflation and was on the high end of what economists expected, but indications are still that inflation remains well below the Fed’s target.
The central bank looks at a different measure of inflation than the CPI. Its favorite metric is Personal Consumption Expenditures, published by the Bureau of Economic Analysis, and the core PCE index in particular, which also strips out spending on food and energy. That rate was 1.06 percent in May, up barely from a record-low 1.05 percent the month before (chart showing the history of Core PCE inflation below).
Expectations of future inflation also remain low. According to the most recent estimates from the Federal Reserve Bank of Cleveland, 10-year expected inflation is 1.55 percent.
Fed officials have said that recent low inflation is a product of temporary factors, such as falling medical prices, and that they expect it to ratchet up in the months ahead. Tuesday’s data shows that inflation is no longer slowing, but it doesn’t provide much indication that inflation is taking off, despite the relatively big CPI increase.