WASHINGTON - U.S. consumer prices edged up slightly in September, with the overall increase held back by a third straight monthly decline in gasoline prices. The tiny gain was the latest evidence that inflation remains benign.
Consumer prices rose 0.1 percent after having falling 0.2 percent in August, the Labor Department reported Wednesday. Core prices, which exclude volatile food and energy, also rose 0.1 percent after no gain in August.
Over the past 12 months, both overall and core prices are up 1.7 percent. The increases are well below the 2 percent target for inflation set by the Federal Reserve. The modest inflationary pressures have allowed the central bank to keep interest rates at record lows to boost the economy.
While low inflation has given the Fed leeway to keep interest rates low, it represents a hardship for savers. It also means millions of Americans who receive Social Security benefits get lower cost of living adjustments. The government announced Wednesday that based on inflation over the past year, benefits will increase 1.7 percent in January, the fifth time in the past six years that the benefit increase has been under 2 percent.
Food costs rose 0.3 percent in September and are up 3 percent over the past 12 months, exacerbated by drought conditions in parts of the country. Beef and veal prices jumped 2 percent in September and are up 16.7 percent since January.
Energy prices fell 0.7 percent, the third consecutive monthly drop. The index includes a third decline in gasoline prices, which fell 1 percent in September and are down 3.6 percent from a year earlier.
A plunge in global oil prices in recent weeks is expected to keep downward pressure on energy prices. Oil is trading below $85 per barrel now, down about 27 percent from its high point this year, giving people a big break at the pump. The AAA says that the nationwide average for gas is now $3.09, down 25 cents in just the past month.
Falling energy prices were expected to be a major factor holding down overall price increases in September and coming months.
"The 0.1 percent rise in consumer prices in September was stronger than the consensus forecast of no change and would have been larger if it wasn't for a 1.1 percent fall in gasoline prices," said Paul Dales, senior U.S. economist Paul Dales of research firm Capital Economics , in a note to clients. "Gasoline will be an even bigger drag over the next two months, with a cumulative 8 percent fall on the cards. Moreover, the previous drop in commodity prices means that September's 0.3 percent rise in food prices probably won't be repeated."
The decline in energy prices is one of the reasons that economists are optimistic that consumer spending will show gains in coming months. If consumers are spending less filling up their tanks, they tend to spend more on other items.
The Fed seeks to promote maximum employment and stable prices. Price increases measured by the Fed's favorite inflation gauge have been running below 2 percent for two years.
With inflation low, the central bank has been able to keep a key interest rate at a record low near zero for nearly six years. The widespread expectation is that the Fed will not begin raising its benchmark rate until around June of next year.