Consumer prices remain stable

WASHINGTON — Consumer prices rose a modest 0.3 percent in June, half the size of the previous month’s advance and fresh evidence that inflation poses no immediate threat to the economy.

The over-the-month increase in the Consumer Price Index — the government’s most closely watched inflation barometer — followed a 0.6 percent spike in May, reflecting a big jump in energy and food costs, the Labor Department reported Friday.

In June, energy and food costs went up, but not by nearly as much. That helped to moderate overall consumer prices and brought a little bit of relief to Americans who have been forced to dig deeper into their pockets to fill up their gasoline tanks and buy groceries.

Excluding energy and foods costs, “core” prices nudged up by just 0.1 percent in June, down from a 0.2 percent rise in May and the smallest increase since December 2003. From an economic point of view, that deceleration suggested prices of other goods and services were relatively stable.

Economists were expecting both the overall CPI and core prices to each rise by 0.2 percent in June.

On Wall Street, stocks were mixed. The Dow Jones industrials were up 8 points, while the Nasdaq was down 8 points in morning trading.

Federal Reserve Chairman Alan Greenspan and his colleagues raised interest rates for the first time in four years on June 30. It was an effort to make sure the expanding economy doesn’t ignite an unwelcome rise in inflation. The Fed increased a key rate to 1.25 percent, from a 46-year low of 1 percent.

Fed policy-makers at that meeting said they were holding to the view that inflation currently doesn’t pose a problem and that rates can be moved up gradually.

But if inflation worsens, the Fed said it would take more aggressive action.

Economists said Friday’s CPI report boded well for a gradual increase in interest rates.

“This fits right in with the Fed’s script for measured tightening of monetary policy,” said Mark Zandi, chief economist at Economy.com. “It confirms their thinking that the pickup in inflation seen earlier this year was indeed largely temporary.”